Readers of this blog are likely familiar with the pernicious effects of anonymous companies, those all-too-secretive corporate vehicles that can be – and often are – used to facilitate corruption. Such entities thwart the ability of investigators, journalists, and civil society watchdogs to “follow the money” and hold bad actors accountable. Despite this obvious problem, there has been little political will to better regulate such entities. Yet that is changing. In the past five years, there has been growing political momentum to put an end to corporate anonymity. Most recently, last month the European Union agreed on landmark regulations that will require public registers of company beneficial ownership information. (The EU also agreed to allow law enforcement, financial institutions, and anyone with an as-yet undefined “legitimate interest” to access trust ownership information.) These groundbreaking new rules will be implemented across the bloc’s 28 Member States.
Given the recent victory in the EU, it’s worth taking stock of global progress and tracing what has helped fuel gains that few thought plausible just a few years ago.
Civil society organizations have been at the forefront of the global effort to mainstream the issue of beneficial ownership. Groups like Action Aid, Christian Aid, Eurodad, the FACT coalition, Financial Transparency Coalition, Global Financial Integrity, Global Witness, The ONE Campaign (where I work), Tax Justice Network, Transparency International, and many others (including many local groups working at the national level) have been fighting for years to highlight the danger of corporate anonymity and to persuade policymakers to do something about it.
Those efforts have benefitted from the work of the International Consortium of Investigative Journalists (ICIJ) and its media partners around the world, whose investigations into the offshore industry based on leaked data has helped open up political space and spur political will. Beginning with its Offshore Leaks in April 2013, followed by the Lux Leaks, Swiss Leaks, Panama Papers, and Paradise Papers, ICIJ’s work has been a game-changer in elevating the issue of corporate anonymity and placing it squarely on the front pages of media outlets and onto political agendas worldwide. The leaks embarrassed governments (and caused some government officials to resign) and left policymakers scrambling to demonstrate that they were taking the exposed problems seriously.
The movement for increased beneficial ownership transparency scored its first major global win at the 2013 G8 Summit, which placed beneficial ownership on its agenda and resulted in G8 members agreeing to a set of principles on beneficial ownership. At the Open Government Partnership Summit in London in October of that year, then-UK Prime Minister David Cameron, who became a leading champion of the issue, committed the UK to becoming the first country to implement a public beneficial ownership register, a pledge that was fulfilled with legislation passed in 2015 (the register went live in June 2016).
Progress on beneficial ownership transparency has accelerated since then:
- In November 2014, the G20 committed to a set of High Level Principles on Beneficial Ownership Transparency, and members agreed to produce individualized national action plans. One month later, the EU agreed to provide access to company information for law enforcement, obliged entities, and those with a “legitimate interest” in the information. Several EU Member States, including Denmark, France, the Netherlands, and Slovenia, went beyond the EU’s minimum standards and implemented full public disclosure for companies, as did Norway.
- In 2015, Ukraine implemented a public register of beneficial ownership as part of its effort to combat corruption in the wake of the scandals that took down the Yanukovych regime. In May 2017, Ukraine signed a Memorandum of Understanding to integrate Ukraine’s beneficial ownership information into the Open Ownership global register. In September, Ghana made a similar commitment.
- In February 2016, the Extractive Industries Transparency Initiative (EITI)—building on a 2013 pilot program—adopted a new standard that encourages implementing countries to adopt public beneficial ownership registers. Twenty countries have already established roadmaps for doing so, and the provision will become compulsory for EITI members in 2020.
- At the London Anti-Corruption Summit in May 2016, 11 countries committed to public beneficial ownership transparency, and a number of others committed to look into ways to address the problem, including through private centralized registers. The UK government pledged to create a new beneficial ownership register of overseas companies that own UK property or participate in UK government procurement, and initiated a public consultation in April 2017.
- Fifteen countries have made beneficial ownership commitments in their Open Government Partnership National Action Plans (Australia, Bulgaria, France, Ghana, Ireland, Kenya, Liberia, Mongolia (extractives), Nigeria, Norway, Slovakia, South Africa, the UK, the US, and Ukraine). With more than 50 countries publishing new plans this year, that number is likely to increase. While the commitments vary in their level of ambition, they nonetheless provide openings for civil society and government reformers to press for meaningful change. In Nigeria, for instance, there have been robust discussions between government officials and civil society, and clear indications that the government is taking seriously its commitment to implement a public beneficial ownership register.
- Some of the UK’s Overseas Territories and Crown Dependencies have taken steps in the right direction. Jersey has had a centralized beneficial ownership register and strict corporate service provider requirements to verify the information since 1989. Other jurisdictions, feeling pressure from the UK government and negative press stemming from ICIJ leaks, have begun taking steps to strengthen their beneficial ownership requirements. For instance, earlier this year the British Virgin Islands enacted new rules that, among other things, create a centralized private beneficial ownership register accessible to both BVI and UK authorities. As previously reported on this blog, the new system isn’t perfect, but it’s a positive step.
In the United States, progress has lagged behind advancements elsewhere. While beneficial ownership legislation has been introduced in every Congress dating back to 2008, no bill has ever passed out of committee. That may soon change: what has traditionally been an issue pushed by just a small group of legislators is gaining broader bipartisan support in this Congress, driven in part by increased awareness of the national security risks that corporate anonymity poses. Bipartisan legislation closely modeled on previous bills has once again been introduced in both the House and Senate, but it’s another not-yet-introduced bill – the Counter Terrorism and Illicit Finance Act – that is quietly gaining traction and may have the best chance of success. It should be noted that all the pending (and draft) bills in Congress would grant only financial institutions and law enforcement access to the information, so even if successful, the US will still lag behind the ambition displayed elsewhere to implement public beneficial ownership registers.
With recent global progress, we’ve moved closer to a world in which beneficial ownership transparency is the accepted standard. A lot of work remains, but the future on this issue looks far brighter today than it did just a few years ago.