A spy drama, the Panama Papers and the fight against corruption

Many of us have enjoyed the BBC’s fictional Sunday night drama The Night Manager, an adaptation of a John Le Carré novel. Tom Hiddleston plays the title character, a night manager in a luxury hotel who encounters his nemesis, Hugh Laurie’s arms dealer Richard Roper, in a variety of exotic locations.

Yet the leak this week of the Panama papers – a huge cache of documents revealing how the rich and powerful use tax havens to hide their wealth – shows that while the BBC drama may be fiction, the complex web it depicts of opaque deals and anonymous shell companies is very much a fact of life in our world today.  

Why does this matter? Research has found that from 2004-2013, developing and emerging economies lost US$7.8 trillion in illicit financial flows from crime, corruption, tax evasion, and other illegal activity – with illicit outflows of cash increasing nearly twice as fast as global GDP during the time period.

Corruption has devastating consequences for people living in extreme poverty. It increases the cost of doing legitimate business, undermining the rule of law and public trust in governance. It excludes vulnerable citizens and those living in poverty from access to essential goods, services and infrastructure. While frequently assumed to be a problem in the global south, with the role of the global north in perpetuating problems overseas historically underplayed, corruption is increasingly recognised as a problem for the whole world. It’s now understood that measures taken in the home states of businesses that operate overseas helps to tackle the issue.

A critical scene in The Night Manager shows protagonist Jonathan Pine, having won the trust of the arms dealer Richard Roper, taking over the directorship of a number of his companies. Despite using a false passport and an assumed name, as the named director Pine is able to act as the front man, making arms deal and transferring cash.    

This scene dramatises something that Cafod and other charities have been working to change for years. Alongside other NGOs, Cafod campaigned to change UK law in 2015 so that from June it should be possible to find out exactly who ultimately owns and profits from a company. The technical term is “beneficial ownership”.

This is crucial. Removing the loopholes that allow those who control and benefit from company decisions to remain in the shadows means fewer options available to people who wish to avoid scrutiny by investors, law enforcement agencies, government agencies and others. The UK will be the first country to have a public register of who controls and benefits from company decisions, hence the Prime Minister’s speedy allusion to the UK’s record on transparency.

But as is clear from this week’s events, much more remains to be done. Next month David Cameron will hold an Anti-Corruption summit in London. Ahead of that event, Cafod wants to see the Prime Minister use the UK’s influence to persuade popular tax havens such as the Cayman Islands and the British Virgin Islands to introduce measures that will bring to light the shadowy owners of companies registered there.

Unfortunately, as of December 2015 when the leaders of the Crown Dependencies and Overseas Territories met with David Cameron at the Joint Ministerial Council in London, only Montserrat and Gibraltar announced concrete progress towards publishing central registers of beneficial ownership. The scale of this week’s disclosures should increase the pressure on the British Virgin Islands and other overseas territories.

In addition, Cafod is asking the UK Government to lead from the front by committing to apply open contracting principles (of transparency, accountability and participation) to climate and development finance and encourage other countries to do the same. This is one avenue towards ensuring that these massive financial flows across borders deliver the right outcomes in terms of tackling poverty and saving our planet. Cafod has also recommended that one specific way to make these finance streams more transparent and accountable is to require the disclosure of beneficial ownership by anyone contracted to work on climate or development finance goals.

Like Dicky Roper in The Night Manager, many very rich, very influential individuals have a considerable interest in keeping their deals secret. What matters now is whether politicians are prepared to act in the interests of all of their citizens to change the status quo.

Anne Lindsay is the lead analyst on the private sector at Cafod