The recent press around the "Panama Papers" leads to some serious considerations for businesses that engage outside counsel. As many of you know, the story centers on the leak of 11.5 million internal documents from the Panamanian law firm Mossack Fonseca which revealed the hidden offshore assets of businesspeople, high-level public officials, and celebrities around the globe.
While in most cases (not all), moving assets offshore is a simple – and legal --tax-strategy, the sensational headlines generated by the publication of the Panama Papers has led to increased scrutiny from a variety of sources. In fact, the US Attorney for the Southern District of New York, Preet Bharara, has opened his own criminal investigation, and President Barack Obama promises new rules.
Any business that provides confidential or proprietary data to its outside accountants, bankers, lawyers, or other third-party professionals should have an active role in ensuring that the right steps are being taken to protect this information. There are significant safeguards to put in place over time, but a few that should be addressed immediately:
- Review the cybersecurity procedures being used. Leaks are a fact of life. It's not just your data that needs to be secure. More and more companies are demanding that their accountants, bankers, and others with whom they do business demonstrate a high level of cybersecurity.
- Review your company's data security standards. While the news around theft of data from the Panama Papers is relatively recent, companies have faced this threat for years. If you haven't yet done so, use this lesson as an opportunity to a review your policies and procedures around protecting your company's most important assets.
- Prepare for increased scrutiny if you are setting up an offshore entity. Many accounting, banking, and law firms will be reviewing and revising their client intake procedures. Clients may now become part of an increased security check by prospective outside counsel.
While we may believe that the Panama Papers scandal won't touch us, don't underestimate the value of following the story as it evolves and understanding its implications.