Panama Papers fallout, part 1: Europeans open official inquiry

The so-called Panama Papers are voluminous files of information from a law firm in Panama that engaged in helping foreign clients avoid or evade taxes with dubious or even illegal shelters. Their publication last spring had immediate and wide-ranging effects around the world, including a new U.S. role on verification of the identities of offshore companies.

In this post two-part, we will update you briefly on some of the ongoing effects of the Panama Papers. We will start by informing you about an inquiry by the European Union into the role of offshore accounts and companies in committing financial crimes.

Last week, the European parliament began official hearings into the Panama Papers scandal. The panel consists of 65 members and will focus its investigation on British overseas territories.

Why such scrutiny for British territories? Apparently members of the European parliament were concerned about the high proportion of questionable companies and other organizations (including foundations and trusts) located there, particularly in the British Virgin Islands.

Other locations include the Channel Islands, the Cayman Islands and Gibraltar.

Of course, the irony is that Britain voted a few months ago to leave the European Union. This could make it even more difficult for the EU to enforce its offshore compliance standards.

For now, however, the official inquiry is underway. And the possible witnesses before the panel in Brussels include former British Prime Minister David Cameron. He is likely to face questions about investments in a Bahamas-based fund that avoided taxes in the UK for many years.

In short, ripples - and difficult cross-currents - from tide of Panama Papers documents continue to swirl on the international stage. In part two of this post, we will discuss how U.S. taxpayers are affected by the new enforcement regime that is emerging in their wake.


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