In early October 2021, the news broke of the coordinated ‘leak’ of 11.9 million documents, from 14 different offshore firms. The ‘Pandora Papers’ is a large-scale investigative project by the International Consortium of Investigative Journalists, the Organised Crime and Corruption Project, and over 600 journalists from 117 countries.
To emphasise the significance of the leak, the Australian Broadcasting Commission, advised that, if printed and stacked, the pile of documents would exceed four times the size of Sydney's Centrepoint Tower.
The documents reportedly contained details of:
- The individuals involved, including 800 Australians, as well as political authorities, and Forbes-listed billionaires.
- Systemic and persistent corruption, whereby those involved in developing legislative and regulatory frameworks, were able to use knowledge gained from their positions to derive personal gain.
A variety of articles published have advised that more than 330 politicians, including 35 current and former government leaders have been named within the documents.
Political and government roles involve a primary responsibility of making informed and effective decisions to protect, serve and benefit communities.
We can expect to see extensive further investigations and reporting into these allegations, inclusive of significant consequences if individuals are proven to have repeatedly and intentionally abused their power to participate in serious criminal activity.
Money laundering isn’t about merely seeking to protect or maximise personal assets, it can result in catastrophic community consequences inclusive of contributing to terrorism financing, drugs, weapons and human trafficking, and the sexual exploitation of children.
- The inconsistent levels of maturity of legislative/regulatory requirements across jurisdictions, which provide opportunities to avoid and/or exploit key Money Laundering and Terrorism Financing (ML/TF) risk controls such as: Customer Identification and Due Diligence procedures, Transaction Monitoring, Suspicious Matter reporting and periodic independent reviews.
Australia was described as an ‘enabling’ country due to our absence of regulatory requirements, similar to the United Kingdom and United States for industries and professions used to facilitate money laundering i.e. accountants, real estate agents and retailers. Transparency International Australia have advised that until addressed, Australia will continue to be considered an “increasingly attractive, and convenient destination … for questionable or even illicit finance…”
Product examples ‘too good to be true’ detailed within the papers include:
- A superannuation fund that required limited customer identification information, was set up as exempt from tax in both the country where the funds were held, and the country where funds originated, and could be drawn upon/ accessed by customer(s) at any time.
- Trust accounts in the Cook Islands which were promoted as a way to hide and protect assets from creditors, relatives, law enforcement officials and other government authorities. Products included a ‘duress clause’ which allowed for the trust to be closed at any time should it become subject to legal or government scrutiny or investigation.
The investigation found that it is important to:
- Have periodic reviews to ensure AML/CTF Programs are operating effectively, are adequately resourced and remain dynamic inclusive of enhancements to the ML/TF risk assessment, transaction monitoring rules, customer identification and due diligence procedures, and active monitoring of customer risk ratings, Politically Exposed Persons (PEPs) etc.
- Have adequate senior management monitoring and oversight of identified vulnerabilities and improvement actions to ensure addressed within a timely manner.
- Maintain evidence of adequate probing into customer profiles and transactions, inclusive of using a consistent and effective framework to assess high-risk clients and examine source of wealth, source of funds.
For AML/CTF advice and support, please get in touch with the specialist team at PKF today.
