Global anti-corruption organisation Transparency International (TI) has long been advocating for the establishment of a global standard for centralised, publicly accessible beneficial ownership registers – whose stored information has been verified. The organisation firmly believes such registers would allow everyone to see the true beneficiaries of anonymous companies, and help authorities, journalists and civil society organisations to more effectively fight corruption, money laundering and other financial crimes.
“Corrupt [individuals] and criminals should not be able to hide behind anonymous companies even in one country,” says TI.
As a TI member, Corruption Watch (CW) is one of a number of chapters which this week wrote an open letter to the heads of delegations of the Financial Action Task Force (FATF), which is currently holding plenary and working group meetings in Paris. The FATF comprises 37 countries and 2 regional organisations.
The letter urges the members to support bold and ambitious measures to advance the global fight against corruption – specifically by clamping down on anonymous companies and insisting on verifiable information relating to the true owner of any business entity.
“This can immensely support the fight against illicit financial flows, which considerably hinder countries from reaching the Sustainable Development Goals. Now, we look to you to bring the reform successfully over the finish line. By voting for strong measures as part of the revised standard, you can help societies everywhere to mitigate the suffering caused by cross-border corruption, money laundering and other financial crimes.”
The chapters are adamant that, to properly and effectively support the African continent in its fight against capital flight, the FATC must “ensure that revised Recommendation 24 requires centralised, public registers of beneficial ownership” for all legal vehicles.
Download the letter, or read it at the bottom of this page.
This follows on from an earlier open letter written in January, to which Corruption Watch was also a signatory along with 11 other African TI chapters. That letter also stressed the absolute necessity of having central, accessible beneficial ownership registers. “According to recent UN estimates, the African continent loses US$88.6-billion per year in illicit financial flows. The capital that should be used for domestic resource mobilisation – to address poverty and inequality, or to manage the Covid-19 pandemic – leaves under suspicious circumstances and with unclear sources of opulent wealth.”
The only effective and reliable way to tackle this, the letter notes, is the “implementation of public, central beneficial ownership registers … for ensuring that foreign and domestic law enforcement authorities have direct, timely and unrestricted access to the real owners of companies. Beneficial ownership registers also bear the advantage of enabling the use of gathered data to assess money laundering risks and therefore improve relevant policies, supervision and enforcement. When this data is made accessible to the public, further oversight by civil society and the media is assured.”
CW’s additional work on beneficial ownership transparency
Much of CW’s work consists of advocating for transparency – in procurement, in leadership appointments, in allocating resources, in matters of governance. Corruption threatens the credibility and effectiveness of these measures and more, and therefore transparency is crucial to curbing, even abolishing the scourge.
Beneficial ownership transparency (BOT) is seen as an increasingly important element of any anti-corruption strategy, as it is fundamental in tackling illicit financial flows, cracking down on corporate anonymity, and tracing the perpetrators of kleptocracy, tax evasion, wildlife crime, and human, drug and arms trafficking.
In December 2021 CW submitted comments on the Companies Amendment Bill, which was published by the Department of Trade, Industry and Competition (DTIC) for public comment on 1 October 2021. The organisation’s submission centred on enhancing transparency and accountability within the new provisions related to beneficial ownership, in light of the ongoing global effort to address corruption, anti-money laundering and financing of terrorism, and also touched on appropriate triggers for disclosure and the content of the disclosure.
The organisation’s main focus in this regard is the mining sector – but it is by no means the only focus. CW also advocates for and engages on the benefits of BOT in other sectors such as health and government procurement policies.
Meanwhile, CW continues the work on BOT which it started as a participant in the accountable mining programme – it was at this stage that beneficial ownership was identified as a key corruption vulnerability in mining licensing in South Africa. Since then the organisation has developed tools with Transparency International Australia on enhancing due diligence and integrity screening in mineral approvals, and has engaged with special advisors of the Department of Mineral Resources and Energy on how the department can improve its systems to ensure that the real owners of mineral rights are known.
An updated version of the tool was recently released.
Long-overdue review under way
The FATF is currently undergoing a review of its beneficial ownership (BO) standards, which are covered in its recommendations 24 and 25. The review’s main focus is on recommendation 24.
24. Transparency and beneficial ownership of legal persons.
Countries should take measures to prevent the misuse of legal persons for money laundering or terrorist financing. Countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities. In particular, countries that have legal persons that are able to issue bearer shares or bearer share warrants, or which allow nominee shareholders or nominee directors, should take effective measures to ensure that they are not misused for money laundering or terrorist financing. Countries should consider measures to facilitate access to beneficial ownership and control information by financial institutions and designated non-financial businesses and professions (DNFBPs) undertaking the requirements set out in Recommendations 10 and 22.
In 2021 the FATF called for public comment and input on the potential revisions. TI made a 22-page submission in August that year to which, as a TI chapter, Corruption Watch was also a signatory.
Letter on beneficial ownership registers to FATF delegation heads
21 February 2022
To Heads of Delegation of FATF Members
Open letter: Your support for strong measures on beneficial ownership transparency crucial during upcoming FATF Plenary and Working Group Meetings
Dear Heads of Delegation,
As you prepare for the Financial Action Task Force (FATF) Plenary and Working Group Meetings taking place from 21 February to 4 March 2022, we are writing to draw your attention to the dire need for the new, fit-for-purpose global standard on transparency and beneficial ownership of legal persons. When you consider and discuss the tabled proposals, Transparency International urges you to unequivocally support bold and ambitious measures to advance the global fight against corruption. By voting for a meaningful revision of Recommendation 24, you can help mark the beginning of the end of an era of worldwide abuse of anonymous companies.
Anonymous companies have long been the vehicle of choice of the corrupt and criminals, sanction evaders and human rights abusers, traffickers of wildlife and drugs. Unscrupulous government leaders have relied on secretive legal entities to launder looted assets, while many more have hidden behind anonymous shell companies to evade taxes. These rampant practices have also tainted the reputation of major financial centres – which you represent – raising doubts about their complicity in cross-border corruption and money laundering.
All too often, when your own law enforcement agencies pursue investigations into such schemes, they hit a dead end and are unable to track down the individuals abusing the global financial system. To that end, we applaud the reforms in individual countries to improve and strengthen rules for collecting and verifying beneficial ownership information. However, as you very well know, the loophole will remain as long as there is still one country where it’s possible to hide behind anonymous companies.
In 2019, Transparency International called for the revision of the global standard on beneficial ownership transparency, and we have campaigned to fix the global standard since then. On various occasions, including in our submissions to FATF, we have made the case for the standard to require centralised, public registers of companies’ real owners.
Transparency International is not alone in calling for this. In recent years, various expert groups and stakeholders from across the world have also spoken in support of the global adoption of beneficial ownership registers. Most notably in 2021, 700 signatories from 120 countries called for a commitment from all countries to establish central, public registers of beneficial ownership. “Transparency in company ownership is more than a technical solution to a problem. It is a matter of social justice,” reads the petition endorsed by academics, civil society activists and representatives from both the public and private sectors.
In October 2021, we wholeheartedly welcomed your decision to put forward much-needed amendments to FATF Recommendation 24. We were particularly pleased to see that you are preparing to require that all countries set up a beneficial ownership register or use an alternative mechanism with equal efficiency. Transparency International readily responded to the public consultation and suggested additional ways to strengthen the proposed standard.
We would also like to note that, as representatives of 37 countries and two regional organisations, you will be voting on measures the impact of which extends well beyond your own countries and regions. That is why in January, Transparency International’s national chapters and partners in Africa urged FATF to “ensure that revised Recommendation 24 requires centralised, public registers of beneficial ownership.” This can support immensely the fight against illicit financial flows, which is impacting the ability of countries to reach the Sustainable Development Goals.
Now, we look to you to bring the reform over the finish line.
By voting for strong measures as part of the revised standard, you can help societies everywhere to mitigate the suffering caused by cross-border corruption, money laundering and other financial crimes. When you deliberate and vote to decide what the new global standard will look like under Recommendation 24, we urge you to bear in mind that you have a historic opportunity to end the decades-long abuse of anonymous companies around the world.
We thank you for your efforts and wish you productive deliberations.