The Perfect Financial Privacy Storm
11 October 2017
Guarding one’s financial privacy in today’s information age has become a challenging, albeit not impossible, task. Not only has technology made the proliferation of private and confidential information to a mass public audience easier, it also ensures that information is potentially retained for all to see, indefinitely. Combine this with the push for global financial transparency, requiring private financial information to be held online via public registers and transported across global borders, and financial privacy has never faced more of a threat.
No clearer can you see a manifestation of this perfect storm than through what has now been coined the “Panama Papers” crisis. Thousands of individuals and companies were affected by the leak of confidential financial information from Mossack Fonseca. 11.5 million documents, some dating back to the 1970’s were analysed by around 400 journalists over 80 countries. The world had not seen such a large scale leak of private and confidential information, affecting people in all corners of the globe. The scandal still rumbles on today as information remains accessible online and not a week goes by without a new story emanating from those documents.
Two things struck me when examining that crisis.
The first was how much of the information leaked was in fact historic information, relating to companies and structures that had been dissolved long ago. But that did not matter to those pawing over the documents and grasping at any offshore connection so as to support their cries of tax evasion or avoidance. Why was historic information relating to closed matters continuing to be retained by Mossack Fonseca, when in most cases the information should have been destroyed after an agreed set of time? If the information had been removed then it would not have been there to be leaked.
Second, it was surprising to see that for many of those caught up in the leak, the first they knew that they were a director of a British Virgin islands company or had an interest in a Panamanian company was when a journalist emailed them with the leaked document which appeared to demonstrate that fact.
This poses the question: why do individuals not know more about the complexities of their financial affairs? After all, it is their privacy and reputation that will ultimately be on the line, and not necessarily their advisors. When a client comes to me in a crisis, the first question they often ask is “how did that information become public?”. The answer, unfortunately, is often closer to home than they’d like to think. I often find myself advising them that the material has come from their own camp. Occasionally, it's been obtained through malicious means, such as a cyber attack, but too often it's the result of an inadvertent disclosure: someone in the family or business not thinking through the privacy and reputation implications of their activities.
The Panama Papers controversy continues to effect those caught up in it. For the majority, they never broke a single law but the reputational fall out of being linked to that controversy continues to negatively impact their business activities. The negative legacy of the publication and global proliferation of their private financial information does not necessarily have to be endured. There are of course legal tools, anchored in data protection, defamation and privacy law, that can be effective in removing confidential or private information from the public sphere. But using reactive legal tools is not ideal, as often by then it is more about mitigating the ongoing reputational damage. Instead, consider proactively:
- Assessing what your private financial information consists of and the potential vulnerabilities in terms of it being leaked or being accessible by third parties.
- Contacting your bank(s) and advisors to question what information they have on their systems. Issue them with a subject access request - obligating them to tell you the personal information they hold on you - and enquire about whether third parties have had access to that information.
- Enquiring as to what measures they have put in place to protect your private and confidential information.
- Reviewing what potentially damaging private financial information already exists in the public domain and whether there are any steps you can take to remove it
- Looking at your financial dealings with your eyes on the reputational impact dissemination of those dealings may have on you or your business.
Ultimately, if you really want to protect your financial privacy and prevent reputational issues arising, it is essential that you proactively investigate and manage your financial information. The trick is to get interested now before someone else does.Receive our monthly newsletter