ICT Views


‘Tis the season to be… more at risk?

by: (Research & Development Manager) on

The season of goodwill is upon us, but it seems nobody has told Jean-Claude Juncker.

The gift of beneficial ownership transparency requested (here) by 45 investigative journalists, will not be made by the EU Commission President, who has recently suggested that public registers revealing the true owners of organisations may not come about after all.

The appeal made by the journalists, who represent 23 different countries from around the world, requested the disclosure of all beneficial owners through a public register to be made available to all.

By way of a simplistic background - by setting themselves up as ‘beneficialowners’, (see here Christmas Treefor FATF definition)criminals and tax abusers can sit behind complex corporate structures, which can be used to cover their tracks and obscure their identities.  Additionally, shell companies (which exist on paper only, with no real employees or offices) are sometimes created to ‘legitimise’ cash being moved across borders, thereby evading detection.  This is something the EU Fourth Money Laundering Directive (4MLD) was thought to be looking to address.

On the face of it, a public register of beneficial owners seems like a perfectly reasonable request.  This will ensure these individuals are exposed, which will, undoubtedly, help in the fight against corruption and money laundering.  However, JCJ (if I may call him that) has instead given an indication that access to this information will be given to third parties who demonstrate a “justified legitimate interest”.

Unfortunately this is likely to hinder any investigations into potential corrupt practices by adding an additional layer of bureaucracy to an already bureaucratic process.

Despite the fact that a central register may not become compulsory, the UK may still enforce it anyway.  This will go further than cementing the changes required under the 4MLD, most of which were considered to be minor rather than wholesale as far as the UK’s existing anti-money laundering approach goes.

It’s not just the UK who is looking to establish a public register either.  Denmark and Ukraine are committed to this too.  However, in order for this to become a successful anti-corruption measure, it’s important that as many countries as possible take the same action.

Admittedly, creating such a register will not be a straightforward task.  The majority of beneficial owners are perfectly legitimate, and use complex corporate structures to maintain anonymity and privacy for perfectly legitimate reasons, perhaps they are a well-known celebrity in the public eye, for example.  It is highly likely that these individuals will be disinclined to surrender their privacy by allowing their names to be submitted to a publicly available register.

My concern regarding this is that, in an EU marketplace where some jurisdictions have publicly available beneficial ownership information and others do not, will this have a significant impact on where banks decide to conduct their business?  Additionally, how reliant can we be on the accuracy of the information captured on the register anyway?

We have already seen a lot of de-risking by major banking corporations who no longer wish to carry out business with organisations considered as high risk.  This has had a major impact on the customers of those organisations, who have become even more vulnerable because they are only now able to access services from banks that are likely to be ill-equipped to manage risk effectively. 

Will the lack of a public register of beneficial owners cause further de-risking?  I guess time will tell, but during the gift-giving season, it’s a gift that some people might miss more than they realise.

0 Comments :

Comment

Comments closed

Archive

Tel: +44 (0)121 362 7534

Blogger facebook LinkedIn Twitter youtube google + Trust Pilot

© 2017 – International Compliance Training Ltd, a division of Wilmington plc. International Compliance Training Ltd, is a company registered in England & Wales with company number 4363296 GB. Registered office: Wilmington PLC, 5th Floor, 10 Whitechapel High Street, London. E1 8QS VAT NO.GB 899 3725 51