A task force set up after the release of the Paradise and Panama Papers to investigate the controversies surrounding them has reported its findings, stating the Channel Islands are in 'a strong position to comply with the principles it sets out'.
This is according to David Cadin, Managing Partner at Bedell Cristin, who was commenting on the joint initiative between the Secretariat of the Organisation for Economic Co-operation and Development (OECD) and the International Bar Association (IBA).
The final report, released at the end of May 2019, identifies eight principles which are recommended to governments and national bar associations and law societies, with a view to them being adopted and ‘ensuring the proper administration of justice and in upholding the rule of law.
Mr Cadin said: “From the perspective of lawyers in the Channel Islands, there is little new in the Principles. For example, Principle 3 concerns ‘Client due diligence’ and states that a lawyer should undertake and document all reasonable and proportionate enquiries in order to identify and verify a client. This is already standard practice in the Channel Islands.”
Pictured: David Cadin.
However, if the principles were agreed, there would still be work to do for island firms and for clients involved in multi-jurisdictional work, he warned.
“While the Channel Islands already comply with most of the recommendations, there is a seemingly minor point in Principle 7, which could have major repercussions: ‘A lawyer should obtain and maintain up-to-date beneficial ownership information and take reasonable measures to verify its accuracy in relation to the lawyer’s client(s).’
“Obtaining the material at a certain point in time is one thing, but maintaining it as accurate and current at all times, long after the retainer has come to an end, is quite different. The concept of ‘once a client, always a client’ has implications far beyond the intended scope of this report.”
In addition, Mr Cadin stated that the report’s suggestion that ‘domestic laws should provide for the disclosure of ultimate beneficial ownership of any corporation, trust or other legal entity formed within that country’s jurisdiction,’ potentially significantly changes the basis of the Channel Islands’ approach to anti-money laundering, corruption and terrorist financing.
“Currently it is the duty of the service provider to ascertain this information but the report’s recommendation shifts the obligation to the, possibly foreign, entity to disclose this,” he said.
“Quite how regulators and others will react to that recommendation remains to be seen, but this would be a significant, global change in approach. The Principles show the possible future direction of regulatory development and clients should therefore consider these now, if only to give themselves justifiable answers in future.”
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