1 August 2022 –
How do we prevent corruption and trace stolen assets through Beneficial Ownership Transparency (BOT)? At a side event organized by the UNCAC Coalition and Transparency International, with the support of Norway, on the margins of the 13th session of the Implementation Review Group (IRG) in Vienna, a group of four panelists explored the impact of beneficial ownership transparency in tracing stolen assets, in particular the importance of full public access to the ownership information through central registries.
Moderated by the UNCAC Coalition, the session was attended by 72 delegates, governmental experts and civil society representatives.
Betzy Marie Ellingsen Tunold, Policy Director at the Section for partnership and development policy analysis, Norwegian Ministry of Foreign Affairs, highlighted that the Norwegian Ministry of Foreign Affairs has recognized the importance of financial transparency, accountability and integrity – not only in the fight against corruption, but also in facilitating beneficial ownership transparency. However, establishing an effective beneficial ownership register still presents many unknowns. The need for such a register is ever more necessary, given the current transnational corruption crisis highlighted by the war in Ukraine. For instance, stolen assets by Russian oligarchs are hidden in secrecy jurisdictions and laundered into real estate and yachts. According to the 2022 Financial Secrecy Index, Western countries, including Norway, fared worse than in previous years. This is tied to their complicity in the money laundering process, as well as the absence of effective BOT, which can be strengthened with further cooperation within society and policy implementation.
Maíra Martini, Research and Policy Expert on corrupt money flows, Transparency International mentioned that in the midst of events in Ukraine, the Organized Crime and Corruption Reporting Project has launched the Russian asset tracker, which uses publicly available information and information gathered from leaks to track down the wealth of Russian oligarchs. This was possible due to the availability of public registers. Therefore, it is crucial to understand that public registers not only help to detect cases relating to money laundering but also support policies and help to combat corruption. It is necessary to go beyond the basic requirements of the UNCAC and collect information on beneficial owners in beneficial ownership registers, which is now required by FATF as the new global standard. There is much value in making these freely accessible to the public. Examples of impact include the identification of former Czech Prime Minister Andrej Babiš as the beneficial owner of a trust that received subsidies from the EU, underscoring the benefit of these registers. Going forward, a global standard for public beneficial ownership registers needs to be fully implemented.
Petra Blum, the investigative reporter at Westdeutscher Rundfunk WDR, highlighted that secrecy jurisdictions all over the world create significant challenges for law enforcement authorities who rely on leaks to gain access to beneficial ownership information. This is indicative of the gaps present in the current implementation of BOT. Petra Blum presented several investigations she has been working on recently, all having in common that owners of assets remained in the dark and had not been traceable – and thus could not be held to account: One case concerns an abandoned hospital in Germany, for which the construction was never completed because it was owned by a chain of shell companies in secrecy jurisdictions, with the local city administration being unable to use the property or carry out enforcement actions. Another relates to the German pig farm fire, whose beneficial owners cannot be made accountable due to their concealed identity through shell companies based in Switzerland. It is evident that a lack of transparency in beneficial ownership also affects the lives of everyday citizens.
Frederik Fabricius Smitt, Senior Data Scientist, Danish Financial Intelligence Unit SCU – Special Crime Unit, discussed the effective implementation of BOT in combating money laundering, with the Danish FIU as an example of good practice: the Danish company register is not only connected to the algorithms that assess suspicious transactions reports (which concern high-risk cases of possible money laundering reported to an FIU) but is also publicly accessible. The Danish FIU’s systems use information from different data sources, including data released by groups such as the International Consortium of Investigative Journalists – ICIJs, as well as from third-party data providers, in order to assess incoming suspicious transactions reports.
There are several obstacles of non-transparent beneficial ownership, according to Mr Smitt, include high thresholds for disclosure of beneficial owners; the use of nominees also affects the use of beneficial ownership data available. Ideally, verification and standardization, detailed information on beneficial owners and API access to ownership data is necessary to facilitate effective investigations on money laundering.
Path to the Future
After the presentations, the panelists exchanged their views on the benefits of FATF’s “multi-pronged approach” and using beneficial ownership information to investigate tax evasion, as well as the reasons behind the 25% threshold. Maíra Martini underlined the necessity of having more detailed FATF standards, which take national regulatory frameworks into consideration. Mathias Huter drew attention to the EU’s Open Data Directive and the campaigns of Access Info Europe and Transparency International to promote open data access to beneficial ownership information, as there were indications of the EU Commission backtracking on previous plans to open beneficial ownership data accross Europe.