Financial Scandals: Secrecy and Leaks

July 01, 2016

At least three important episodes have been in recent months, and the negative impacts are still concerns of sovereign and regulators.

In the fifth month of the year several financial scandals have kept the headlines in the newspapers of the Philippines. In February, hackers successfully moved 81 million US dollars Bangladesh's account at the Bank of the Federal Reserve a Filipino universal account. The funds may have finally found their way to the casinos and other sites. The matter is still under investigation by the Society for International Financial Telecommunication Interbank (SWIFT, for its acronym in English), a system super sure banks use to authorize payments from one account to another (an analyst describes SWIFT as the Rolls Royce networks payments).

In early April 2016, the hot topic on business news, print and electronic, were 11.5 million leaked documents from a law firm located in Panama, Mossack Fonseca, on financial "secret or confidential" transactions abroad, of world leaders, celebrities and sports stars. Some "who's who" and the world's elite were named "beneficiaries" or "participants". It was assumed that the documents had been obtained from an anonymous source by a German newspaper, and shared with more than 100 media groups by the International Consortium of Investigative Journalists.

Last April, it was reported that the computer systems of the National Bank of Qatar (QCB, for its acronym in English) had been hacked. The QCB issued a statement through its website regarding the cyberattack would not have a "financial impact" on its customers, but there was an acceptance that, for the first time, customers had been targeted. Potentially, the "data leakage" can expose the names, passwords, cell phone numbers, credit card numbers and international banking transactions of tens of thousands of customers.

Two common threads are woven through the three major financial-assets "episodes" important / valuable information and secrecy behind them. The negative impacts of leaks of these transactions and secret / confidential financial information concerns remain sovereign and regulators.

On April 22, members of the Economic and Financial Affairs Council agreed to undertake a pilot project for automatic exchange of information on "effective owners end" following the letter to the so-called G-5 (the United Kingdom, Germany, Spain, France and Italy), stating the group's intention to continue with the project. The result of this can pave the way for the development of a "global standard and interconnected registers" full beneficial ownership information. The Organisation for Economic Co-operation and Development Task Force and the Financial Action will be the main actors. European Commissioner Valdis Dombrovskis said that the Commission will follow the mandate to "explore ways to introduce ways to discourage those who give advice on planning prepare tax evasion and tax avoidance schemes."

Advanced countries are always ahead in safeguarding the interests of economies and nations. One can only hope that other regional groupings and countries subsequently adopt best practices in the world to be worthy of membership in the League of Nations.

If governments do not deceive its citizens so often, there would be less need for secrecy, and if leaders know they can not rely on keeping the public in the dark about what they are doing, they would have a powerful incentive to behave better. " Peter Singer

Dra. Conchita L. Manabat
President of the Development Center for Finance and member of the Foundation for Research Development and FINEX
clm@clmanabat.com