G20 action on beneficial ownership a potential boon for UNCAC compliance

8 December 2014, by Heather Lowe and Liz Confalone, Global Financial Integrity.

Leading into the November 2014 G20 Brisbane Summit, a broad coalition of civil society organisations, including the UNCAC Coalition, stepped up their advocacy, focused on urging leaders to take action on anonymous companies—companies for which actual ownership or control is hidden or disguised and thus lack beneficial ownership transparency. The actions included an open letter to G20 leaders coordinated by Transparency International that was signed by more than 25 members of that coalition and called on G20 governments to collect and publish beneficial ownership information, as well as to require companies to publish their tax information on a country-by-country basis.

Business leaders supported action as well. Mo Ibrahim, founder of Celtel International, wrote an open letter on behalf of himself and six of his colleagues on the B Team – a coalition of successful business leaders co-founded by Richard Branson and Jochen Zeitz working toward sustainable business practices – expressing business support for governments to collect beneficial ownership information. The B20 – a forum of business leaders invited yearly by the G20 to provide policy recommendations – also lent its support to the adoption of core principles on beneficial ownership developed by the G8 in 2013.

The G20 took action. Recognising the deleterious effects of the use of anonymous companies on stolen asset recovery, collection of taxes, and other corruption-related activity, G20 leaders built on previous statements about anonymous companies and took a concrete step to advance beneficial ownership transparency during the Brisbane Summit. Committing to “lead by example”, G20 leaders adopted the High Level Principles on Beneficial Ownership Transparency, which outline actions that countries should take to promote beneficial ownership transparency.

The High Level Principles stop short of calling for public registries, however. Specifically, they assert that companies and trusts should maintain accurate and adequate beneficial ownership information and that competent authorities should be able to access this, suggesting that a central registry of beneficial ownership information could be an appropriate mechanism for accomplishing these goals. Further, financial institutions and other financial actors should be required to identify and take reasonable measures to verify beneficial ownership of their customers.

These measures tie directly into UNCAC obligations, such as instituting regulatory and supervisory regimes requiring the identification of customers and, where appropriate, beneficial owners (Article 14(1)(a)), and requiring financial institutions to verify the identity of customers, to take reasonable steps to determine the beneficial owner on high-value accounts, and to use enhanced scrutiny on accounts held by politically exposed persons or their associates (Article 52(1)).

Momentum has been building to tackle the problem of anonymous companies. In June 2013, the G8 adopted principles on beneficial ownership. Later, the UK announced it would prepare a public register of beneficial ownership and the European Parliament voted in favour of requiring public registries of beneficial ownership as part of its revisions to the EU’s Anti-Money Laundering Directive.

In October 2014, FATF issued guidance to describe actions countries could take to improve information on beneficial ownership in their jurisdictions. Recently, Denmark has announced that it will begin the process of generating its own public register.

Progress has been made, but more work must be done.

First, the High Level Principles should be the baseline for all future action on beneficial ownership. Endorsement of the High Level Principles by the UNCAC Conference of States Parties can build this consensus.

Second, the UNCAC COSP should to go further and endorse public registers of beneficial ownership information. Public registers would serve as a significant deterrent to the use of anonymous companies as vehicles for moving corrupt funds and would make it much easier to identify stolen assets.

G20 Leaders committed to “taking concrete, practical action in 2015” related to beneficial ownership transparency. The COSP can help ensure that concrete action is meaningful action that fully addresses the problem of anonymous companies. Continued efforts by civil society, like those in advance of the Brisbane Summit, are essential to keep beneficial ownership transparency at the top of the global agenda and to drive progress forwards.