UPDATE 1-UK watchdog says too early to draw conclusions on Panama Papers

(Adds more detail)

By Huw Jones

LONDON, April 26 (Reuters) - Britain's Financial ConductAuthority has widened its review of banking links to businessesand individuals whose names appeared in the leaked PanamaPapers, saying it was too early to draw any conclusions, thewatchdog said on Tuesday.

The FCA wrote to 20 banks and other financial institutionsasking if they have had dealings with Mossack Fonseca, thePanama law firm at the heart of a massive leak of offshorefinancial data.

The banks were given an April 15 deadline to respond to anumber of questions about relations with Mossack Fonseca andwhat were they doing internally regarding their exposure, FCAacting Chief Executive Tracey McDermott told parliament'sTreasury Select Committee.

A second tranche of firms has been contacted and given aslightly later deadline to respond, she added. An FCA spokesmansaid this second wave comprises 40 financial firms.

"It is far too early to give any view as to preliminaryfindings," FCA acting Chief Executive Tracey McDermott toldlawmakers.

"We are making enquiries with both our regulatory and ourlaw enforcement hat on."

There was nothing necessarily illegal in offshorearrangements and not all of the Panama Papers have been releasedto authorities like the FCA, McDermott said.

A significant amount of business in Panama would be expectedto be "perfectly legal", she added.

Leaks from the Panama Papers have embarrassed several worldleaders and shone a spotlight on the shadowy world of offshorecompanies. Mossack Fonseca has said it broke no laws, destroyedno documents, and all its operations were legal.

McDermott said the FCA is also part of the task-force led bythe UK tax authority, the National Crime Agency and the SeriousFraud Office to coordinate any response to issues that emerge.

The FCA has put together a team of people to look at theresponses from banks.

Some serious criminal issues have been reported in the mediabut it was hard to work out whether this was just the tip of theiceberg, McDermott said.

"The challenge at the moment is actually knowing what theiceberg is," McDermott said.

"We need to understand a little bit more about the factualposition in relation to these issues before we can say it's anenormous problem from a perspective of the legal framework."

(Reporting by Huw Jones; Editing by Mark Potter and LouiseHeavens)