Pandora Papers: European Parliament describes UK and US as global hubs for money laundering and tax evasion

Pandora Papers: European Parliament describes UK and US as global hubs for money laundering and tax evasion
British Virgin Islands, credit: Unsplash/Matt Briney

The European Parliament adopted on Thursday a resolution taking the European Commission to task for not doing enough to combat money laundering, tax evasion and tax avoidance in the member states and worldwide.

The resolution, following the recent disclosures in the Pandora Papers, was adopted by an overwhelming majority with 578 votes in favour, 28 against and 79 abstentions (21 October).

The parliament identified the most urgent measures the EU needs to take to close loopholes that currently allow for tax avoidance, money laundering and tax evasion on a massive scale. MEPs also called for legal action to be taken by the Commission against EU countries that do not properly execute existing laws.

Several member states are delayed in their implementation of existing rules intended to counteract money laundering and tax avoidance. These laggards should be pursued by the Commission, according to the resolution.

The Commission is also asked to issue proposals regulating golden citizenship and residency schemes and to assess the effectiveness of the identification of politically exposed persons and the application of enhanced due diligence. The resolution mentions a number of former prime ministers and ministers of EU member states who were exposed in the Pandora Papers.

The most known persons are Andrej Babiš, Czechia’s Prime Minister, Nicos Anastasiades, President of Cyprus, Wopke Hoekstra, Dutch Minister of Finance, Tony Blair, former British Prime Minister, and John Dalli, former Maltese Minister and EU Commissioner. Babiš was defeated in parliamentary elections earlier this month.

The resolution urges national EU authorities to launch thorough investigations of any wrongdoing revealed in the Pandora Papers involving their jurisdictions, including audits on all individuals mentioned.

The Commission is asked by the MEPs to review the revelations to analyse whether further legislation should be proposed and establish if legal action against some member states is warranted. According to MEPs, the European Public Prosecutor should also assess whether the revelations merit any specific investigations.

One year after the implementation deadline for an anti-money laundering directive, nine member states had failed to establish public registers, that can be used to identify ultimate beneficial owners, especially in situations in which a network of shell companies is used; while others had imposed geographical access restrictions, in breach of EU rules.

EU blacklist of tax heavens incomplete

In particular, the Parliament levels heavy criticism against the current EU blacklist of tax havens, which it describes as a “blunt instrument”, unable to catch some of the worst-offending countries.

The Parliament deplored the fact that following the Pandora Papers revelations, the Council of EU Finance Ministers decided to shorten the EU list of tax havens, removing the Caribbean islands of Anguilla and Dominica, as well as the Seychelles, which featured in the Papers.

Two thirds of the shell companies in the Pandora Papers are located in the British Virgin Islands, which has never featured on the EU blacklist and still are not included in the list.

The report calls for the granting of access for the UK financial sector to the Single Market for financial services to be made conditional on the respect by the UK of common tax and anti-money laundering standards.

For the first time, the Parliament also condemned the role of the United States as a hub for financial and corporate secrecy. Some US states, such as South Dakota, Alaska, Wyoming, Delaware and Nevada, have become hubs of financial and corporate secrecy, as exposed by the Pandora Papers.

Nicholas Shaxson, a researcher at the Tax Justice Network, wrote recently in The New York Times that Britain is at the system’s heart. “Taken together with its partly controlled territories overseas, Britain is instrumental in the worldwide concealment of cash and assets. It is, as a member of the ruling Conservative Party said last week, ‘the money laundering capital of the world.’”

“The UK’s network of overseas tax havens makes it easy for individuals and organisations to hide their wealth,” commented MEP Sven Giegold MEP, Greens/EFA spokesperson on financial and economic affairs.

“The Commission must link the access for the British financial sector to the EU’s Single Market with the UK’s alignment with our common standards on tax transparency and anti-money laundering. The Commission cannot continue to allow the UK and its tax havens to be a magnet for money laundering and tax evasion on our doorstep.”

“US states have become a global hub for financial and corporate secrecy and are enabling tax evasion, avoidance and money laundering,” he added. “We call on the US to once again show international leadership against financial secrecy by taking the automatic exchange of information to the next level.”

M. Apelblat

The Brussels Times

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