31 January 2020 – 

During the UNCAC COSP8 in Abu Dhabi, the UNCAC Coalition co-organized this Special Event on Beneficial Ownership Transparency – i.e. public access to information about the real, ultimate owners of companies and other legal entities who stand behind a network of other entities – alongside Transparency International, StAR, Civil Society Legislative Advocacy Centre Nigeria and UNODC-ROSEAP on 17 December from 15.30 – 17.00.

Moderators: José María Marín, Transparency International & Shervin Majlessi, StAR

Panellists and most important points:

Thom Townsend, Executive Director, OpenOwnership – presented the work of OpenOwnership

OpenOwnership supports people in understanding corporate structures, which can be very difficult, especially with large businesses, by aggregating all openly available beneficial ownership data securely into a single place and making it publicly available, so that it is searchable in various ways.

There are 6.2 million companies in the register to date, and more are continuously coming online.

Even though there is now a growing base of good practice within the international community and there is a lot of political will, there is a massive implementation gap. There is a big need for data cooperation.

Concerning privacy, the GDPR has clear provisions on the publication of personal information and the register perfectly works with these regulations.

OpenOwnership places an emphasis on interoperability and creating a common data standard, which is important because there is a difference between access and usability. Data standards do not mean that everyone has to have the same tool but ensure that technology is able to communicate with one another to identify businesses. Finding common components and being able to make links is crucial – such links may be made accross jurisdictions by linking beneficial ownership data from different registers and countries, or between different types of datasets, for example by linking beneficial ownership data with public procurement and contract award data.

Requirements of Beneficial Ownership Transparency:

• Information release has to be timely
• We have to be able to find data across different jurisdictions and nations
• The data has to be verified

 

Irina Stefuriuc, Team Lead, Anti-Corruption, DG Home, European Commission – talked about why the EU‘s ​5th Anti-Money Laundering Directive (AMLD) was passed so quickly after its previous version and its requirements

The 4^thAMLD from 2015 was amended only three years on because:

• Two major events happened in 2016:
  • The Panama Papers highlighted the role of media and investigative journalism in uncovering tax evasion and tax fraud through the use of shell companies
  • Terrorist attacks in the EU prompted the UK to take all measures possible against terrorism financing
• Globally, there was an increased focus on transparency in business and tax requirements. Governments created formal reporting obligations on Beneficial Ownership Transparency.
• The EU recognised the complexity of Beneficial Ownership Transparency as a key risk factor.

The main improvements of the 5th AMLD (in effect since 10 January 2020) are:

• Improved transparency on the real owners of companies, and, to a certain extent, also on trusts, through public access to national beneficial ownership registers
• Interconnection of the national beneficial ownership registers at EU level
• Enhanced powers of EU Financial Intelligence Units
• Extension of Anti-Money Laundering and Counter-Terrorism financing rules to include virtual currencies, tax-related services and traders in works of art

Reasons why the EU considers public access to beneficial ownership information on companies – but not on trusts – important:

• Because they are two different regimes
  • For companies: information now needs to be public before it is accessible by law enforcement. Wider public access enhances public scrutiny.
  • For trusts: there needs to be a register with beneficial owners of trusts which the government has direct access to. Other persons who want to have access have to it can express their interest. If the trust is owned by a government company, access will be granted.
• Reasons to keep this distinction (which was a compromise, in the end):
  • Legal reasons: the legal basis of the EU is the internal market, so there is more legal basis for issues around profit-making.
  • Mitigating factors: the concept of legitimate interest needs to be understood broadly. It is not difficult to prove legitimate interest in accessing data for media and NGOs. Legislation also ensures that little leeway for interpretation is left – member states have been encouraged to open all registries for public scrutiny.
  • Data privacy and protection of personal data: has to be kept in mind to protect vulnerable persons/minors. The directive recognises the need to introduce some exceptions/mitigating factors.

The outcome is still very ambitious and sets the EU well ahead of the rest of the world. And by 2021, registers will need to be interconnected as a business register interface system.

For more information on the European Commission’s work on Anti-money laundering and counter-terrorist financing, see here.

Anna Andrejšinová, Director of Legislation Division of Civil and Commercial Law, Ministry of Justice of Slovakia – talked about the recent extensive Beneficial Ownership Information reform in Slovakia

Until 2017, Slovakia had regulation requiring that Beneficial Ownership information is collected from companies that participate in public procurement. Since 2018, the coverage is much wider and includes all so-called partners of the public sector, including all entities that participate in public procurement, receive public funds, participate in privatisations or receive licenses, as well as health care providers and health insurance companies.

• Registration is free of charge, the data is publicly
• This regulation also applies to foreign companies doing business with the Slovak state. Over 500 such companies are registered.
• An authorised person outside the government checks the beneficial ownership information and is accountable for it being correct.

As a result, ties between the public and private sector are revealed.  Overall, the disclosure requirement is having a positive impact on competition.

Plans are currently considered to connect the public sector partner register with the register of public contracts (all government contracts in Slovakia have to be published online in full text – for more details, see the notes of our side event on “Making Transparency Work” at the COSP8).

María Del Carmen Rúa Villamarín, Certified Internal Auditor, Supreme Audit Institution, Uruguay – presented on the Uruguayan Beneficial Ownership register

 The Uruguayan central register for beneficial ownership information has a registration threshold of 15% of ultimate ownership.

The register is:

• administered by the Central Bank of Uruguay,
• not freely accessible, but the public can see who has registered,
• composed of 3 levels of access:
  • full access – for the Central Bank and certain ministries
  • limited access – for fiscal mechanisms
  • free access – only when beneficial owners allow it.

These different institutions play a specific role in using the register’s information.

The information is verified by the Central Bank as well as several other institutions/associations by checking:

• if all requirements are fulfilled,
• the volume of activities,
• the income,
• any reports received from financial institutions, like sanctions,
• information with other countries.

Achmad Taufik, Senior Cooperation Specialist, Corruption Eradication Commission (KPK), Indonesia – talked about the Indonesian approach on Beneficial Ownership Transparency

The Indonesian government is taking Beneficial Ownership Transparency very seriously since it is encountering increasing risks of money laundering. Indonesia has adopted a national anti-corruption strategy which includes obligations to register beneficial owners. The strategy implementation is divided into 3 steps: data collection, record-keeping, and access to the information.

The government initiated a research study to identify gaps in implementing Beneficial Ownership Transparency in the country and found eight main gaps:

• Definition of Beneficial Ownership
• Who is the designated party to cooperate with the government?
• How to implement a single registration system?
• Timely access
• Proportionate sanctions
• Document retentions
• Targeting and random sampling by an independent party to ensure BOT
• Type and scope of legal arrangement

Therefore, Indonesia is at an early stage of implementing the new mechanism and is facing the challenge of how to increase the willingness of legal entities to make BOT work. Several registries already exist, so there is an urgent need for information exchange between the different databases in order to verify the information.

Comment from the audience: Steve Baker from Jersey, private lawyer – talked about how Jersey’s “Gatekeeper Model” and “active verification” approach work

• If you are a foreign national and incorporate a Jersey company, you have to do this through a financial business or trust company regulated by the Jersey financial services commission and disclose who the beneficial owner is.
• It is a criminal offence to lie to the commission, which you can get convicted for.
• The registry carries out certain checks, like judgements against or convictions of a person, on its own by analysing the information of various databases.
• Baker anticipated that Jersey will adopt an international standard on BOT.

Questions from the audience and main points of the panellists’ answers:

What are the main challenges in establishing Beneficial Ownership Transparency?

• Lack of strong political will to formulate regulations to eliminate gaps
• Finding definitions of Beneficial Ownership – need for much discussion and consultation
• Making legal entities register
• Good implementation:
  • need for extensive capacity building and training
  • need for sanctions to push changes through
  • verification through registering authority is crucial

What system of registry is most advisable to take as a starting point?

• As seen in Slovakia, the sectoral approach works well, starting with the public sector and moving on to public procurement, the health sector. This is a good starting point to build public acceptance.
• The sanctioning mechanism must be in place and effective
• In Slovakia, when a public sector partner is deleted from the system, it is also banned from the system. These bans are also important.
• Weaknesses in the system should be tackled early on, if possible.