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  • April 8th, 2016

Panama Papers – Unauthorised Disclosure

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Mossack Fonseca

The disclosure of sensitive information to a public source give rise liability for losses suffered as a result of the breach of confidentiality by the Law firm.

However, immediate concerns in UK surround how agencies such as HMRC will react to the disclosure and how they use the information that they have gained.

The most likely approach will be that they will find the simple cases to pursue first and try to make an example to encourage cooperation and voluntary disclosure from less straight forward cases.

Criminal jurisdiction

HMRC use their powers under criminal law when they believe that there has been :-

  • Conspiracy to cheat the Revenue
  • Tax evasion
  • Money laundering

Where HMRC can prove that an off shore jurisdiction has been used to avoid paying tax that would otherwise be payable in the UK- the criminal jurisdiction can be used to prosecute [or at least threaten prosecution].

Evasion of taxes arises where the taxpayer deliberately uses an off jurisdiction when there is no natural connection to the transaction or the tax payer.

Avoidance of tax is lawful but becomes evasion when the off shore jurisdiction is a device to hide what would be taxed normally in the UK.

Conspiracy can be charged where there is an agreement when more than one party embark on a course of conduct the purpose of which is to dishonestly avoid paying tax and could involve responsibility on the part of financial advisers or institutions with a UK tax payer.

To prove Money laundering offences, HMRC have to prove that the UK tax payer has ‘converted’ or ‘transferred to or from an off shore jurisdiction’ funds which constitutes ‘criminal property’. Criminal property is property derived from criminal conduct. [Proceeds of Crime Act 2002]

Defending cases arising from Panama Papers – [unauthorised disclosure – Mossack Fonseca]

If HMRC approach a case as a crime, they can obtain search warrant if they have reasonable grounds to do so to search businesses and homes but more likely is an invitation to interview under caution.

Interview under caution

You need a solicitor to represent you in an interview under caution. What you say in an interview under caution is evidence that can be used in Court and the decision to answers questions or not can have repercussion on how any prosecution case is formulated.

If you have an explanation or facts that would show that you are innocent, you need to put these on then record to avoid prosecution. If you are blaming a financial adviser or institution for suggesting that you use an off shore jurisdiction to save tax – explaining this at an early stage is important to create the framework for your defence or to avoid prosecution. You can file a pre prepared statement setting out the case from your point of view but you need to have it drafted with legal advice so that is cover the factual elements required for your defence.

You do not have to say but anything you do say can be used as evidence against you. If you exercise your right of silence, and you are prosecuted, the Court can be asked to infer liability or guilt from silence in interview.

HMRC have make disclosure of material that they are going ask you about so that you can make an informed decision about your response. We believe that HMRC will use their powers under criminal law to investigate cases because it is simple and cost effective to approach it this way rather than by a civil liability approach which h is complex and time consuming for them.

Legal Privilege

All of your communication with solicitors about any possible criminal offence are covered by legal privilege and only in the most exceptional circumstances can they be disclosed or be referred to. That right does not apply to financial advisers or institutions especially those that advised on the use of off shore jurisdictions to save tax. Confidentiality is a civil right and is very different and does not protect against the scrutiny of an investigation [document search or questioning].

Who can you get help from?

If you are worried that you may have allowed your name to be used, or have been involved in a transaction with an off shore company that might scrutinised by HMRC, MJP solicitors are dealing with calls and can give advice under the protection of legal privilege. The initial advice is free to establish whether there is a of risk prosecution but we may ask you email details of your concerns to [email protected] and we will go through them before calling you back.


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