Weak regulation has allowed law firms to ‘ignore or break the law with complete impunity’, an influential MP claimed today in an emergency Commons debate on the Paradise Papers scandal.
Dame Margaret Hodge, Labour MP for Barking and former chair of the public accounts committee, claimed that Appleby - the ‘offshore magic circle’ firm at the centre of the storm - had ignored repeated criticism from regulatory bodies and failed to change its procedures. These criticisms included an alleged failure to comply with regulations designed to stop the funding of terrorism and to prevent money laundering, she said.
Hodge, who called this afternoon’s debate, said the Paradise papers reveal regulators in tax havens had talked of ‘persistent failures and deficiencies’ at the firm and that it had been criticised 12 times in 10 years. She said the reports also talked of a ‘highly significant weakness in the adequacy of the organisation’s systems and controls and a deficiency in meeting its regulatory requirements’.
‘Further documents reveal that Appleby simply ignored these critical reports and failed to change their procedures despite strong words from the regulatory bodies,’ Hodge added. She claimed that regulatory frameworks are ‘so weak that law firms can ignore or break the law with complete impunity’.
She continued: ’It is hopeless having self-regulation, national and international codes of practice and regulatory bodies with legal powers, if in practice they fail to secure compliance and good behaviour. The lawyers clearly just did not give a damn, and nobody held them to account.’
Hodge also called for curbs on the influence of tax professionals on tax policy. ’Making the advisers accountable for the schemes that they invent and market is central to the campaign to destroy tax avoidance,’ she said.
The role of offshore law firms in tax avoidance has again come under intense scrutiny following the leak of the Paradise Papers. Appleby, which strongly denies any wrongdoing, told the Gazette it had nothing further to add its earlier statements on the affair.
In a statement last week last Appleby said it ‘advises clients on legitimate and lawful ways to conduct their business’ and does not tolerate illegal behaviour. It described the media coverage as a ‘patchwork quilt of unrelated allegations with a clear political agenda and movement against offshore’.
The statement added: ‘We take client confidentiality extremely seriously and we are disappointed that the media has chosen to use information which has emanated from material obtained illegally. This has very little to do with accurate and fair reporting, and everything to do with the pursuit of a political agenda. These journalists will not permit fairness and accuracy to get in the way of their political objectives.’
