On financial secrecy and leaks

Dr. Conchita L. ManabatIf governments did not mislead their citizens so often, there would be less need for secrecy, and if leaders knew they could 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

It is only the fifth month of the year, and yet, several financial scandals have hugged the headlines of broadsheets in the Philippines.

In February hackers successfully moved $81 million from the Bangladeshi central bank’s account with the Federal Reserve Bank New York to a Philippine universal bank. The funds eventually found their way to casinos and elsewhere. The matter is still under investigation by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a supersecure system that banks use to authorize payments from one account to another. (One analyst describes SWIFT as the Rolls Royce of payments networks.) Also probing the heist are the Philippine Senate and the Bangladeshi government.

Early April 2016, the burning issue on business news, print and online was the 11.5 million documents leaked from a Panama-based law firm, Mossack Fonseca, on the “secret or confidential” offshore financial transactions of world leaders, celebrities and sports stars. Some of the world’s who’s who and the elite were named “beneficiaries” or “players.” The documents were supposed to have been obtained from an anonymous source by a German daily and shared with more than 100 media groups by the International Consortium of Investigative Journalists.

In April it was reported that the Qatar National Bank’s (QNB) computer systems were hacked. The QNB released a statement through its web site that the cyber attack would have ”no financial impact” on its customers but there was admission that for the first time, its clients were targeted. The “data leak” may potentially expose the names, passwords, mobile-phone numbers, credit-card numbers and international bank transactions of tens of thousands of customers.

Two common threads weave through the three major financial “episodes”—significant/valuable assets and information and the secrecy behind them. The adverse impacts of the leaks of these secret/confidential financial transactions and information have been the continuing concerns of sovereigns and regulators.

On April 22 the European Union Finance Ministers Council members agreed to undertake a pilot project for the automatic exchange of information on the “ultimate beneficial owners,” following the letter by the so-called G5 (the United Kingdom, Germany, Spain, France and Italy) manifesting the group’s intent to pursue such pilot project.  The outcome of this pilot project may pave the way for the development of “a global standard and interlinked registries” containing full beneficial ownership information. The Organization for Economic Co-operation and Development and the Financial Action Task Force will be the prime movers behind this development. European Commissioner Dombrovskis cited that the commission will follow up on the mandate “to explore ways to introduce disincentives for those who give advice in tax-evasion planning and elaborate tax-avoidance schemes.”

The European Commission also intends to have a revised proposal for the Anti-Money Laundering Directive, in the context of the fight against terrorism financing.

The advanced countries are always ahead in safeguarding the interests of economies and nations. One can only expect that other regional blocs and countries will subsequently adopt the world’s best practices to be worthy of membership in the league of nations.


Dr. Conchita L. Manabat is the president of the Development Center for Finance and a Trustee of the Finex Development & Research Foundation. A past chairman of the International Association of Financial Executives Institutes (IAFEI), she now serves as the chairman of the Advisory Council of the said organization.

She is also a member of the Consultative Advisory Group of the International Ethics Standards Board for Accountants. She can be reached at clm@clmanabat.com



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