Source: Transparency International
This weekend G20 leaders adopted new high level principles on beneficial ownership transparency in Brisbane, declaring “financial transparency, in particular the transparency of beneficial ownership of legal persons and arrangements a ‘high priority’”. But just how good are these principles? Here are six take-home points:
1. They were adopted. And that’s a good start.
To bring a set of countries as diverse in political and economic leanings as Australia, India, Mexico, Saudi Arabia, South Africa and the UK to agreement on an issue as sensitive as making it harder for individuals to hide behind secret companies, especially when corrupt public officials may be involved, is a tremendous challenge. The G8 adopted beneficial ownership principles last year under David Cameron’s leadership. Those principles have certainly informed these G20 principles but the diplomatic efforts required to scale up so quickly from eight to 20 members must be congratulated, not least with late reservations from China.
2. More ambition needed
The principles state that countries should ensure that law enforcement, tax authorities and other “competent authorities” have access to information in a “timely” manner to follow dirty money trails. They “could implement this, for example, through central registries of beneficial ownership of legal persons or other appropriate mechanisms”. It is disappointing that the word “public” is missing from the central registries – after all, it is regrettably only a suggestion, not a full commitment. Public registries would, of course, be a method that would produce the most timely access of this information to all relevant authorities and other stakeholders, including in other jurisdictions trying to follow the money trail. Public registers would strip the veil of secrecy from those abusing corporate entities.
3. We may see a shift towards cracking down on the people and sectors who help the corrupt enjoy lives of luxury
One G20 principle that is a new addition to those adopted by the G8 last year is a commitment to “identify high-risk sectors, and enhanced due diligence could be appropriately considered for such sectors”. We hope that within this framework, additional attention can be placed on looking at the luxury goods sector and real estate which allows the corrupt to enjoy lavish lifestyles, as well as accountants and lawyers who make it happen. Of course, we would prefer that once the high-risk sectors are identified, enhanced due diligence “will be applied” as opposed to “could be considered”.
4. Ambiguity could wreak havoc with identifying concrete actions
There are many instances in the new principles where ambiguous wording could provide camouflage for inaction. This wording needs to be tightened up – if not in G20 statements then at least in national level legislation and policy.
According to the principles, authorities should have “timely” access to beneficial ownership information in order to do their due diligence. But why not “direct” or “automatic” access?
In one principle “countries should require financial institutions and DNFBPs [Designated Non-Financial Businesses and Professions, such as lawyers, accountants and real estate], including trust and company service providers, to identify and take reasonable measures … to verify the beneficial ownership of their customers.” Yet the next clause states that countries should only “consider facilitating access” to that information. One way to facilitate access is to make this information automatically and freely available – preferably through a public register.
5. It’s good to see emphasis on international cooperation.
G20 countries are being asked to “ensure that their national authorities cooperate effectively domestically and internationally” and exchange information “with international counterparts in a timely and effective manner”. Cross-border corruption by its very nature requires good cooperation. The G20 is one of the major forums that can help bring this about.
6. Momentum is growing. There’s no going back.
This year has seen unprecedented unanimity from a range of actors on the need for enhanced beneficial ownership transparency. Each of the official G20 engagement groups called for beneficial ownership transparency within their priority recommendations. The Civil 20, Think 20 and Youth 20 each made a call for G20 countries to adopt public registries containing beneficial ownership information in their key recommendations. The Business 20 called for G20 governments to “endorse the G8 core principles around transparency of ownership and control of companies and legal arrangements”.
In addition, an open letter to G20 Leaders coordinated by Transparency International and signed by 25 global civil society, anti-corruption and religious leaders called on G20 leaders to adopt public registries of beneficial ownership. The signatories included two Nobel Peace Prize Laureates, Archbishop Desmond Tutu and Tawakkol Karman, as well as the heads of Transparency International, Global Witness, Global Financial Integrity, Amnesty International, Oxfam, Care International and others.
Australia should feel pleased that it managed to bring all G20 members to a common agreement on action they need to take to make it harder to for the corrupt to hide behind secret companies. There is restlessness amongst civil society for better, stronger, more ambitious commitments and actions. But a key point is that these new high level principles bring all countries on to one page. It’s now down to pressure at the domestic level to have these principles adopted and strengthened back on a national level.
• This article was first published on the Transparency International website
