The Paradise Papers have an influence on KYC checks in banks, financial institutions and insurance companies. Although the Paradise Papers are not officially recognized, more than just a few companies made the decision to check the KYC profiles of their customers for reputational reasons.
The Paradise Papers had only just been disclosed when financial institutions and insurance companies already started new KYC activities: They are checking the data of their customers and business relationships and comparing them to entries from the Paradise Papers. In November 2017, the International Consortium of Investigative Journalists (ICIJ) published data records with the names of more than 120 state and government heads and politicians from 50 countries, multinational corporations and high-net-worth individuals. The accusation: tax avoidance and evasion by means of questionable corporate structures in tax paradises.
Do banks and insurance companies now have an additional problem?
For legal reasons, banks and insurance companies check on a regular basis whether there are entries on sanction lists for their customers. They either use official or commercial sanctions lists or both in combination. The best-known official lists are:
- Consolidated List of persons, groups & entities subject to EU financial sanctions (CFSP)
- Consolidated List of Financial Sanctions Targets in the UK (HM Treasury)
- Denied Persons List (DPL)
- The Entity List (EL)
- Specially Designated Nationals & Blocked Persons List (SDN)
- Unverified List (UL)
- List of the Swiss State Secretariat for Economic Affairs – SECO
Paradise Papers: Not officially recognized, but nevertheless damaging to reputation
In contrast to official sanctions lists, the data from the Paradise Papers are not officially recognized. These involve leaked information. Nevertheless, more than just a few banks and insurance companies made the decision to check the KYC profiles of their customers for reputational reasons.
Olaf von der Lage, CEO at Complias Ltd., Zurich, justifies this step as follows: “The data in the Paradise Papers highlight business transactions that are already many years in the past. If transactions are found, which were opportune 15-20 years ago and are a no-go from a present perspective, the financial institutions do not necessarily have a legal problem, but there may be a negative impact on its reputation.”
How is the check for Paradise Paper key words realized?
Several sanctions lists have been supplemented with a Paradise Paper key word in the meantime. If ACTICO’s Name Matching Customer check program is used, the data for persons or companies can be checked for this key word. This is not included in the standard software package, but can be implemented quickly. As a consequence of this, the “hits” are clarified individually, in order to find out whether there is a need for action or not.
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