THE publication of the Panama Papers and the revelation that David Cameron benefited from his father’s offshore trust may not have done him permanent political harm. But it has added to pressure on politicians in Britain and elsewhere to be seen doing something to oppose offshore entities being used to avoid tax and launder money.

Unfortunately, although the UK government is making some good noises and even one or two useful moves in this direction, its proposals for dealing with offshore companies seem somewhat half-baked. Other European countries are focusing on the somewhat more peripheral issue of trusts, despite their lesser role in hiding criminal behaviour.

It is worth remembering the context to the controversy. The UK is in an awkward position because of its links with many of the world’s offshore finance centres. There is a serious risk that business will be driven elsewhere, particularly to the US, if the UK undertakes unilateral action.

The UK’s transparency plans seem unlikely to make a big difference

Last Wednesday, the UK government released proposals for ‘unexplained wealth orders’, which would shift the burden of proof on to suspected money launderers to prove that their assets were legitimately acquired. It also confirmed an announcement made last year that it would go ahead with a plan requiring offshore companies that buy property in the UK to reveal who controls them.

Assuming that the process of making the orders is transparent and follows due process, it could be a useful tool in uncovering illicit flows of money. More important is establishing the basic question of who owns what. Here, the UK government has yet to convince that its plans for a property ownership register will make much difference.

It is unclear whether the list will include existing offshore companies rather than just new ones. It is also all too easy to imagine that determined and creative money launderers will be able to use figurehead owners to hide the true beneficiaries.

Meanwhile, the European Commission is trying to tighten further the rules for registration not just of offshore companies but also of trusts, which were exempted from EU transparency rules after pressure from the UK.

The motive to push for more transparency is, in principle, laudable. But there is not a great deal of evidence that trusts are a big part of the problem. A report into grand corruption by the World Bank some years ago found that trusts made up only about 5pc of the corporate vehicles used to hide the proceeds of corruption.

The UK is in an awkward position because of its links with many of the world’s offshore finance centres. There is a serious risk that business will be driven elsewhere, particularly to the US, if the UK undertakes unilateral action

Just as Mr Cameron with his personal circumstances feels the weight of history here, so does the UK as a whole. Many of the world’s leading offshore financial centres are British dependencies or overseas territories. The UK has long connived at or actively encouraged their activities as tax havens, both to provide a source of post-colonial economic growth and to funnel business back to the City of London.

The industry, with some justification, is concerned that a clampdown on offshore companies will merely send business to the US, where Delaware and Nevada stand ready to welcome it. The US has long trumpeted its commitment to ending banking secrecy, but the same cannot be said of using offshore companies to hide money.

The sum total of policy response sparked by the Panama Papers has been less than inspiring. Politicians are making the right noises. But it will take a lot more detail and implementation, and an internationally concerted rather than a piecemeal effort, if significant inroads into restricting illicit offshore finance are to be made.

FT editorial comment

Published in Dawn, Business & Finance weekly, April 25th, 2016