During formal meetings in Paris last week, the Financial Action Task Force (FATF) approved a revision of its recommendation 24, ushering in a new global standard on beneficial ownership transparency. This is a win for the fight against corruption, money laundering and other financial crimes around the world.
It is also a collective victory for the efforts of civil society organisations like global anti-corruption organisation Transparency International (TI) which, together with its network of global chapters including Corruption Watch, has long advocated for such an outcome. The establishment of a global standard for centralised, publicly accessible beneficial ownership registers will prevent corrupt individuals and criminals from being able to hide behind anonymous companies, and will reveal the true beneficiaries of companies, wherever they are operating.
“This new global standard from FATF provides a welcome point of entry for government to address the key issue of corporate opacity,” says Mashudu Masutha, legal researcher at Corruption Watch. “This amplified level of transparency calls for government to put in place actionable policy that will provide citizens with knowledge of exactly who government is doing business with. It will allow financial institutions to effectively tackle financial crime, and prosecuting authorities to identify politically exposed persons in corruption cases,” she adds.
The adoption of a global standard that ensures beneficial ownership transparency has particular significance in sectors such as mining, an industry in which Corruption Watch (CW) has made extensive inputs. Reports of large-scale corruption between mining companies, local government and traditional leaders has had a devastating effect on mining communities across South Africa, with millions siphoned from their tribal accounts. The organisation’s campaigns have advocated for greater accountability and transparency in the sector, including commitment to the Extractives Industry Transparency Initiative.
Despite these interventions, the evidence of cross-border corruption and money laundering, and the steady stream of illicit financial flows from South Africa and the rest of Africa calls for strong and bold measures to ensure that the opportunities for corruption and a whole range of financial crimes perpetrated by global players in the region, is reduced. The progress in implementing the standards already in place has been too slow and uneven, allowing corruption to continue unabated and contributing to the growing inequality in the country.
CW was a signatory to the open letter submitted by TI on 21 February 2022 to the heads of delegations at last week’s FATF meeting in Paris, following an earlier open letter written in January and signed by CW and 11 other African TI chapters, that stressed the necessity for central, accessible beneficial ownership registers.
The adoption of the global standard on beneficial ownership transparency has several important elements to enable greater transparency. These include the decision to make beneficial ownership registers a requirement, with the compromise of an alternative mechanism that includes an explanation that it should provide authorities with efficient access. The company approach which is premised on authorities relying on information collected by companies themselves will no longer be considered a mechanism.
It is also significant that countries will be in a position to obtain beneficial ownership information of foreign-created legal persons which have sufficient links with their country. The standard stipulates that all beneficial ownership information must be verified and that access to beneficial ownership information in the course of public procurement must be assured. Further measures include the prohibition of bearer shares, and the regulation of nominees.
“The work is just beginning and the implementation of recommendation 24 will go a long way to building trust and confidence of not only public procurement but also the business environment in key economic sectors such as mining and indeed more broadly across the whole economy,” Masutha concludes.
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