What are the potential impacts of The Pandora Papers that firms need to consider?

By now we have all heard of the recent Pandora Papers scandal. This currently represents the largest leak of shell companies in history, with 14 offshore firms acting as enablers at the heart of the investigation.

We expect there will be many more revelations to come, as more than 600 global reporters continue to dig into, and report on their findings.

While the whitepaper Financial crime compliance – the cost of getting it wrong – produced by financial crime agency Themis in collaboration with Encompass – was written just before the Pandora Papers were released, it certainly sends out a cautionary note. Non-compliance with anti-financial crime regulations means material impact on more than just the bottom line – whether the revelations are through scandals like this or public regulatory enforcement.

While it is too early to calculate direct financial loss stemming from the Pandora Papers, the whitepaper provides examples of banks whose annual profits and share prices were negatively impacted by regulatory penalties. No doubt we will continue to see additional penalties as findings from the Pandora Papers make their way to regulators and enforcement agencies.

We are however already seeing reputational damage. US lawmakers are calling for a crackdown on financial ‘enablers’ (including trust companies, law firms, accountants), who facilitate the setup of offshore companies. Prominent politicians, public figures and law firms have been mentioned in the Pandora Papers. The whitepaper highlights a study by Hayas where corporate reputation accounts for one third of stock market valuations.

In our upcoming webinar on Wednesday 01 December, we’ll be sharing highlights from The Pandora Papers, findings on the financial and reputational impact of financial crime from the whitepaper and exploring the positive impact regulations can have on bank valuations.

The whitepaper provides timely advice and there are lessons financial institutions can draw from it as they look at how to keep their name out of the next scandal.