Hackers obtained and leaked 11.5 million documents from Mossack Fonseca, a law firm based in Panama. The leaked documents stirred up controversy for those mentioned in the files, as well as the companies and public figures they are associated with. The scandal also shed a negative light on the use of shell companies, which authorities say people – more often than not – use for evading taxes and laundering money.
Now, both the law firm and the banks these clients work with, face pressure from the media and government officials to explain their role in the activities the documents uncovered.
The Effect on the People Named
The “Panama Papers” included offshore accounts of businesses and public figures; including 12 politicians who now hold or once held positions as heads of state. In fact,some of the high profile names mentioned or implicated in the documents include Russian President Vladimir Putin, Argentina’s President Mauricio Macri, and Iceland’s Prime Minister Sigmundur David Gunnlaugsson.
The scandal affects the level of trust and respect these politicians can command from the public and the media, going forward. For some, it may signal the end of their career. Putin, for instance, insists that America is behind the attack and likely released the documents to hurt his chances of re-election. And Gunnlaugsson stands accused of severe conflicts of interest, and has been asked to step down.
Several Americans identified in the documents are also under investigation, and many already had past convictions for financial crimes related to Ponzi schemes and securities frauds. For many people implicated from around the world, their reputation as financial experts and entrepreneurs may forever remain tarnished, despite their best efforts to fix it.
How this Hurts Banks
Georg Masolo, head of the investigative unit for the newspaper who obtained the Panama Papers stated in an interview, “If you were to ask me which German bank hadn’t helped its customers go to Mossack Fonseca, I would have to think long and hard to see if a single one came to mind.”
This widespread issue at least makes it more difficult to single out any one bank at all times, but will also likely cast a shadow on all banks in Germany for some time. This shadow will affect business with clients looking to maintain a squeaky clean image. It also affects dealings with authorities like the U.S., who are now on high alert. As a result, the bank may begin to lose some of its higher-end clientele, looking to avoid scrutiny.
How Banks Should React
In spite of all this, the banks show no sign of panic. All communications with the media remains civil, with a repeat of innocence. They insist that they followed the rules, and have no involvement with clients’ illegal activities – if authorities uncover any. They also insist that many clients had legitimate reasons for setting up offshore accounts.
Swiss and German banks are no strangers to controversy and the nose poking of authorities. This calm strategy of subtly repeating innocence, and putting the client first, has worked for years and will likely continue to work.
As it relates to their internal customers, however, the banks should distribute reassuring emails and letters to not just clients, but employees as well. Many employees consider jumping ship when scandal strikes and their own reputations are on the line, just as clients do. Clients may leave quietly, but former employees may feed the controversy for personal gain, or to save their own skins.
As a result of this and other incidents involving illegal financial activities, Swiss and German banks may forever remain closely scrutinized by American authorities. But, until laws change, they – and many of their clients – remain mostly untouchable.
Even so, their clients, alongside other names and public figures affected by the “Panama Papers” can expect to spend years trying to scrub their names clean of this scandal. It is likely the largest and most insightful one the global financial community has seen, and will not be easily forgotten.
About Ronn Torossian
Ronn Torossian is the Founder and CEO of 5W Public Relations. He is an experienced leader in the public relations industry with over 20 years of experience. Ronn Torossian has been named as Public Relations executive of the year by the American Business Awards, and has run countless award-winning Public Relations programs.