Center-right MEPs want to water down rules proposed in the aftermath of last year’s Panama Papers scandal — a leak of more than 11 million documents from the Panama-based law firm Mossack Fonseca — over concerns about privacy.
The proposed changes to EU anti-money laundering laws are currently bogged down in confidential discussions between MEPs over how much information about the owners of trusts should be made accessible to the public.
Although trusts are not illegal, the Panama Papers renewed a debate about how they can be used to hide money from tax authorities and law enforcement.
A vote on the proposals in the Economic and Monetary Affairs Committee was postponed last week to mid-February after MEPs failed to agree on the issue of public access.
The Commission argued last year that making a limited amount of information public is justified because “the enhanced public scrutiny will contribute [to] preventing the misuse of legal entities and legal arrangements, including tax avoidance.” It also dismissed concerns about privacy, arguing it had ensured a “proper balance” between the need for transparency in the financial system and personal data protection.
However, the European People’s Party’s Krišjānis Kariņš, one of the MEPs leading the negotiations, has demanded an exemption from the rules for so-called inheritance trusts — potentially weakening the position he proposed with Judith Sargentini, a Green MEP, in November last year.
“If we push for full transparency too far and people start realising what that actually means in terms of their own privacy, we will get an unwanted backlash,” Kariņš told POLITICO, reflecting concerns raised by Europe’s banking lobby.
His efforts have so far been rebuffed by left-wing MEPs who, along with many NGOs, argue his suggestion would create loopholes, according to emails seen by POLITICO.
“It’s no good introducing much-needed transparency for companies if we leave open a giant loophole for people to evade tax by hiding money away in trusts,” said Anneliese Dodds, an MEP from the Socialists & Democrats group. “Sunlight is the best disinfectant.”
At the moment, there is no legal definition of an inheritance trust. Murray Worthy, a campaigner at the NGO Global Witness, said that trusts set up for inheritance purposes can be used “to retain ill-gotten gains in the family.”
Both MEPs and governments must agree on the changes in the coming months before they become law, although concerns have been raised about the role of the Malta in negotiating the deal on behalf of the Council.
The Panama Papers revealed that Konrad Mizzi, a senior Maltese minister and close ally of Prime Minister Joseph Muscat, had opened offshore companies and trusts in New Zealand and Panama. Muscat’s chief of staff was also named in the leak, although both deny any wrongdoing.
In a hearing at the Parliament last week, Malta’s Finance Minister Edward Scicluna rejected suggestions his government was being weak on corruption. “It is about balance,” he said, describing the position agreed by EU governments on what information should be made public.
“Public transparency of beneficial owners will inevitably become a reality,” said Olivier Boutellis-Taft, the CEO of Accountancy Europe, the association representing global accountancy firms like PwC and E&Y, pointing out that such information is already available in some EU countries. “I am sure it will be seen not only as legitimate but as a non-issue in a few years.”