The Panama Papers furore highlights yet again how international financial centres must set a clear distinction between legitimate financial privacy and secrecy. It also shows there must be respect for due process of law in chasing alleged wrongdoers.

Developments around the “Panama Papers” saga are moving so fast that by the time you read this, it may be that more public figures, alive or dead, will have been drawn into the claims about the use and misuse of offshore structures via Panama. 

The “leak” (aka theft) of 11.5 million data files, provided to the Washington DC-based International Consortium of Investigative Journalists, and a host of other news groups, is one of the investigative coups of the year. Some of those journalists who have shone a light on the matter may be showered with awards. And revenue authorities in a number of jurisdictions will start to use this data to mount investigations. 

The affair has led the likes of Jeremy Corbyn, the leader of the UK’s opposition Labour Party, to call for the UK to exert direct rule over those IFCs linked to the UK, and never mind that places such as Jersey and Guernsey, for instance, have been independent jurisdictions for hundreds of years and won’t take kindly to such a threat. (Corbyn’s desire to see a sort of new UK imperialism seems rather at odds with his desire that the Falkland Islands, an overseas territory, be handed back, in whole or as part of some partnership, to Argentina, but that’s another story.)

The story raises questions of how far journalists and others parties should go after a story and who gets to decide what is and what isn’t in the public interest. This is particularly important when some of the attacks on the offshore world are arguably politically biased rather than simply a matter of objective justice. In the latest story, it is conceded even by the ICIJ that having an offshore account is not, ipso facto, proof of being a criminal.

Regarding the data hacking/leak issue, readers will remember how a mass-circulation UK newspaper, the News of the World, was shut down a few years ago by its owner, Rupert Murdoch, following a scandal of how certain reporters for that paper had broken into mobile phone messages in pursuit of stories of varying levels of seriousness. The saga so appalled the British public that the UK government of prime minister David Cameron set up the Leveson Inquiry into the practices of the media, calling for certain restrictions and controls. These proposals prompted howls of largely justified rage that the UK media was being placed under state control. 

When it comes to hacking, the Panama Papers saga is a classic example in the questions it throws up about how far journalists, and others, should go. Something is troubling about the leaks/thefts at the expense of jurisdictions such as the British Virgin Islands, Switzerland and Guernsey. In all these cases, data was taken from private accounts in clear breach of the law. It may well be the case that the “public interest” is served by obtaining data in this way, but who gets to decide this, particularly if a trawl of data affects thousands of people who haven’t necessarily done anything illegal? In the English Common Law, evidence obtained by theft is inadmissible in court. (I am not sure that the same restriction applies to the laws of, say, Germany or France.) It is highly undesirable that investigations into people are initiated as a result of data thefts for the obvious reason that this could encourage criminals, not just supposedly public-spirited whistleblowers, to steal data for personal gain, compromising legitimate client confidentiality in the process. There is a fine line here. 

Legitimate privacy of financial information is important, all the more so when those who are in the firing line aren’t necessarily the most sympathetic of figures. Such privacy is in danger of being trampled in the pursuit of exciting stories about dictators and pals of politicians stashing money thousands of miles away. Consider the fact that kidnapping is a risk so large in some countries that people will take the option of going offshore to avoid trouble. Brazil, for example, will find that its recent tax amnesty programme may not encourage everyone to disclose affairs because people are worried about their physical security. If we want to stamp out shady tax havens, it is essential that more is done to keep financial data of law-biding people safe. And in many parts of the world, that is far from certain. 

The wealth management industry needs to be more assertive than it has been in making it clear that while secrecy and concealment of ill-gotten gains is unacceptable, it is not acceptable for people’s financial affairs to be put in the full public glare. Otherwise, due process of law is endangered. We urge regulators and IFCs to work much harder at setting the right boundaries, and communicating them clearly.

The Panama Papers saga shows that the offshore world, despite all the changes taking place – such as the Common Reporting Standard – still has an image problem, and also some problems of substance. It is of little use to protest the agendas of some of their persecutors. The offshore world must continue to clean up its act, insist on the highest standards of behaviour, aid serious whistleblowers and continue to push the case for protection of legitimate financial privacy.