Tag Archives: beneficial ownership

Guest Post: An Anticorruption Agenda for the Biden Administration

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Today’s guest post is from Lucinda A. Low and Shruti Shah, respectively Acting Chair and President of the Coalition for Integrity, a U.S. based non-governmental organization focused on fighting corruption. The opinions expressed here are those of the authors, and should not be attributed to the organization..  

The United States has a long history, across administrations of both parties, of showing leadership internationally in the fight against corruption. The passage and enforcement of the Foreign Corrupt Practices Act (FCPA) has served as an example for other countries to adopt their own transnational anti-bribery laws. Additionally, the United States has championed international anti-bribery efforts in multilateral organizations and worked to build coalitions to root out all types of corruption. For the last several years, however, U.S. has faltered. In order to reestablish the U.S. as a global leader against corruption, and to get its own house in order, the Biden Administration and the new Congress should embrace an ambitious agenda that includes the following elements: Continue reading →

New Podcast, Featuring Gary Kalman

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this week’s episode, we’re delighted to welcome back to the podcast Gary Kalman, the Director of Transparency International’s United States office. I was fortunate to be able to interview Gary a little over one year ago, just before he stepped into his new role as TI’s U.S. Director. In our more recent conversation, we had the opportunity to discuss how his first year in this position has gone, touching on some major successes–most notably the passage of the Corporate Transparency Act, which requires companies to provide the government with information on their true beneficial owners–as well as ongoing challenges. Gary discusses some of the advocacy strategies that proved effective on the corporate transparency issues, and suggests how similar strategies might be deployed to advance other aspects of the anticorruption agenda. He also lays out what he sees as the highest priorities for TI’s advocacy work in the United States, and what vulnerabilities have been exposed by the experience with the Trump Administration and how those might be addressed. You can also find both this episode and an archive of prior episodes at the following locations: KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Guest Post: For Whose Benefit? Reframing Beneficial Ownership Disclosure Around User Needs

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GAB is pleased to publish this post summarizing a recent paper on beneficial ownership disclosure by Anton Moiseienko (Research Fellow) and Tom Keatinge (Director) of the London-based Centre for Financial Crime and Security Studies at the Royal United Services Institute.  In the paper, the authors examine current standards governing disclosure of beneficial ownership data, the challenges of ensuring the data’s accuracy, and the needs and interests of the data’s different users. It will be of particular interest to American policymakers given enactment of the Corporate Transparency Act.

Beneficial ownership disclosure – the collection and sharing of information on genuine (rather than formal or nominee) owners of assets – has become a central issue in the fight against corruption and other financial crimes. To whom to disclose it can be controversial, as the very public spat between the United Kingdom, and several of its Overseas Territories shows. Moreover, even countries committed to full public disclosure face challenges in ensuring implementation meets promise as continuing discussions among EU member states shows.  

Arguments over the extent of disclosure and verification can obscure an equally important issue, ensuring the ownership data meets the needs of domestic and foreign law enforcement agencies, tax authorities, regulated businesses, and the public at large. In our paper, we examine not only to whom the information should be provided and how to guarantee it is accurate but how to be sure what is collected and disclosed serves the interests of different types of users. It is based on a review of publicly available sources and over 40 interviews, including more than 25 with experts based in British Overseas Territories and Crown Dependencies, jurisdictions where the lack of information on beneficial ownership has been a major concern internationally.

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A Few Thoughts on the Passage of the U.S. Corporate Transparency Act

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[Note: I drafted the post below earlier this week, before yesterday’s shocking events in the U.S. Capitol. I mention this only because it might otherwise seem odd, and perhaps a bit tone-deaf, to publish a commentary on new corporate transparency rules when we just saw an attempted insurrection incited by the siting U.S. President. I don’t really have anything to say about the latter events (at least nothing that others haven’t already said), so I decided to go ahead and publish the post I planned to publish today anyway.]

Last week, as I suspect many readers of this blog are well aware, the United States Congress enacted one of the most significant anticorruption/anti-money laundering (AML) reforms in a generation. The Corporate Transparency Act (CTA), which was incorporated as part of the annual National Defense Authorization Act (NDAA), will require—for the first time in the United States—that corporations, limited liability companies, and similar entities will have to provide the U.S. government (specifically, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN)) with the identities of the ultimate beneficial owners of those entities. That beneficial ownership information, though not made publicly available, will be provided to law enforcement agencies, as well as to financial institutions conducting due diligence (with customer consent). This reform will make it substantially harder for kleptocrats and their cronies—as well as other criminals, including human traffickers and terrorists—to conceal and launder their assets in the United States through anonymous shell companies, and will make it substantially easier for law enforcement to “follow the money” when investigating possible criminal activity.

This important reform has already gotten a ton of coverage in the anticorruption/AML community (see here, here, here, and here), as well as the mainstream media (see here, here, here, and here), though mainstream coverage has understandably been overshadowed by both the coronavirus pandemic and President Trump’s attempts to subvert the recent election. And we’ve had quite a bit of discussion of the issue on GAB prior to the passage of the NDAA (see, for example, here, here, here, here, and here). So, I’m not sure I really have that much to add to what others have already said. Nevertheless, it felt strange to allow this landmark event to go entirely undiscussed on GAB, so at the risk of self-indulgence, I’d like to throw out a few additional thoughts and observations related to the CTA. Continue reading →

FACTI Background Paper: Beneficial Ownership

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The United Nations High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda Financing for Sustainable Development (FACTI) is developing reforms to tax and anticorruption laws, asset recovery rules, beneficial ownership disclosure requirements, and other international norms to staunch the outflow of illicit funds from developing nations and speed the return of corrupt monies held abroad (preliminary report here).

A critical issue the panel will address is the reforms necessary to ensure corrupt officials cannot use a corporation, trust, or other legally created entity – a “legal person” in lawyer-speak — to hide their wrongdoing.  Those investigating corruption, money laundering, tax evasion, and other financial crimes must be able to identify the real, natural person – the beneficial owner – behind a legal person if we are to curb the massive theft of assets from poor nations. In his background paper for the panel, Andres Knobel of the Tax Justice Network explains how criminals use legal persons to shield their wrongdoing and the measures required to end these abuses.  Most importantly, his condemnation of the injustice of the current laws governing legal persons serves as a powerful prod to action. His summary of the paper is below and the full text here.

Beneficial ownership: more than transparency, it’s about justice

The Panama Papers revealed the involvement of many public figures in offshore legal vehicles causing turmoil all over the world. But the real scandal wasn’t the data that was revealed. Rather, the scandal was the fact that we needed a leak to obtain data that should have been available in the first place.

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The Art World is Rife with Corruption, But Suspicious Activity Reporting Requirements Aren’t the Answer

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Customs officials at JFK airport didn’t have a reason to be suspicious. After all, the package wasn’t anything special—just a regular shipping carton with an unnamed $100 painting inside. Only later did it emerge that the $100 unnamed painting was, in fact, Hannibal, a 1981 painting by Jean-Michel Basquiat valued at $8 million. Authorities across three different continents had spent years trying to track down Hannibal, along with other famous works by Roy Lichtenstein and Serge Poliakoff, that Brazilian banker Edemar Cid Ferreira had used to launder millions of funds he illegally obtained from a Brazilian bank. It wasn’t until 2015, nearly ten years after Edemar’s conviction for money laundering, that US authorities managed to return Hannibal to its rightful owner, the Brazilian government. Meanwhile, thousands of other paintings move across borders with few questions asked about who owns them, who’s buying them, and for what end.

The art world is readymade for corruption. Paintings—unlike real estate—are readily portable. Their true value, as Hannibal illustrates, is readily disguisable. And the law does not require disclosure of the buyer or seller’s true identity. Unlike real estate, where ownership can be traced to a deed, the only available chain of title for most artwork is its “provenance”—which is commonly vague, falsified, or not readily verified. Recognizing that money laundering in the art world is a big (and growing) problem, there’s been a flurry of recent proposals to address that problem. In the United States, Congressman Luke Messer proposed a new law called the Illicit Art and Antiquities Act, which, if enacted, would amend the Bank Secrecy Act (BSA) to require art and antiquities dealers to develop an internal compliance system, report cash payments of more than $10,000, and file the same sorts of “suspicious activity reports” (SARs) with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) that the BSA currently requires of financial institutions and money service businesses. And in Europe, the EU’s Fifth Anti-Money Laundering (AML) Directive dramatically expanded suspicious transaction reporting requirements for art dealers.

These developments show that legislators on both sides of the Atlantic are taking the challenge of art corruption seriously, which is an encouraging development. Unfortunately, expanding SAR requirements, while appropriate in other contexts, is misguided when it comes to the art world, for two reasons:

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New Podcast, Featuring Gary Kalman

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A new episode of KickBack: The Global Anticorruption Podcast is now available. In this episode, I interview Gary Kalman, formerly (and at the time of the interview) the Executive Director of the FACT Coalition, and now the Director of the U.S. Office of Transparency International. The first part of our conversation focuses on the work Mr. Kalman did at the FACT Coalition on the push for new U.S. legislation to crack down on anonymous companies. We also discuss his vision, and top priorities, for Transparency International’s new U.S. office.

You can find this episode, along with links to previous podcast episodes, at the following locations:

KickBack is a collaborative effort between GAB and the ICRN. If you like it, please subscribe/follow, and tell all your friends! And if you have suggestions for voices you’d like to hear on the podcast, just send me a message and let me know.

Beneficial Ownership Registry Coming to the United States?

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This may be the year the United States finally requires disclosure of who owns American corporations.  By a 43-16 vote, the House Financial Services Committee recommended on June 11 that the full House of Representatives approve legislation creating a beneficial ownership registry accessible to federal and state law enforcement agencies and presumably to foreign law enforcement authorities through a valid mutual legal assistance request.  At the same time, a bipartisan group of Senators, including two conservative Republicans who back President Trump, is proposing similar legislation in the Senate.

The American legislative process is an arduous one.  The Financial Services Committee’s proposed bill must be passed by the House of Representatives; an identical bill approved by the Senate, and President Trump must then sign it. Long-time supporters of a registry cite two reasons for optimism a bill will pass this year. One, 10 Republican members of the Financial Services Committee voted for the bill and others may support it when the House considers it, and second, the Senate bill has the support of Republican Senators close to President Trump.

Key provisions of the committee-approved bill: Continue reading →

Guest Post: Evaluating the Personal Privacy Objections to Public Beneficial Ownership Registries

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Today’s guest post is from Adriana Edmeades-Jones and Tom Walker of The Engine Room:

The abuse of anonymous companies to facilitate corruption, tax evasion, and other sorts of criminal activity has prompted reformers to call for corporations and other legal entities to provide governments with accurate information on the true (or “beneficial”) human owners of these companies. Transparency advocates have argued that governments should not only compile such beneficial ownership registries, but should make them public.Public beneficial ownership registries, according to their proponents, would increase the efficiency of financial investigations, ease the due diligence burden on companies investigating supply chains and corporate counterparties, and enable media civil society to scrutinize more effectively who owns and controls what among the global corporate elite. Opponents have advanced multiple objections to creating public beneficial ownership registries, including questions about their accuracy and effectiveness, as well as concerns about the effect on individual privacy, and the associated risks that such public registries could facilitate “identity theft, cybercrime, and blackmail.”

How seriously should we take the “personal privacy” objection to public beneficial ownership registries? In a new report, OpenOwnership, The Engine Room, and the B Team propose a framework to evaluate this issue, borrowing from the structured analysis of international human rights law. Crucially, under international human rights law not every interference with personal privacy qualifies as a violation of an individual’s privacy rights. A violation only arises if the interference with privacy lacks a legitimate justification. Determining whether an interference with privacy is justified, in turn, entails addressing three questions: (1) Is the interference lawful (that is, consistent with generally-accepted standards governing personal information)? (2) Is the interference necessary to advance some legitimate aim? (3) Is the degree of interference proportionate to the legitimate end sought?

Application of these three criteria in turn suggests that an appropriately-designed public beneficial ownership registry would not violate individual privacy rights: Continue reading →

Are Legislative Changes to US AML Rules Finally on the Way? Some Thoughts on Tomorrow’s Subcommittee Hearing

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Although the United States has been a leader in the fight against global corruption in some respects—particularly in its vigorous enforcement of the Foreign Corrupt Practices Act and, at least until recently, its diplomatic efforts—there is widespread agreement in the anticorruption community that the United States has not done nearly enough to address the flow of dirty money, much of it stolen by kleptocrats and their cronies, to and through the United States. Effectively addressing this problem requires updating the US legislative framework, a task made difficult by the checks and balances built into the federal legislative process, coupled with high levels of political polarization. Yet there are reasons for cautious optimism: Thanks in part to skillful lobbying efforts by several advocacy groups, and aided in part by the Democrats taking control of the House of Representatives in the most recent mid-term elections, it looks as if there’s a real chance that the current Congress may enact at least some significant reforms.

Three of the reform bills under consideration are the subject of a hearing to be held tomorrow (Wednesday, March 13, 2019) before the House Financial Services Committee’s Subcommittee on National Security, International Development, and Monetary Policy. That hearing will consider three draft bills: (1) a draft version of the “Corporate Transparency Act” (CTA); (2) the “Kleptocracy Asset Recovery Rewards Act” (KARRA); and (3) a draft bill that currently bears the unwieldy title “To make reforms of the Federal Bank Secrecy Act and anti-money laundering laws, and for other purposes” (which I’ll refer to as the Bank Secrecy Act (BSA) Amendments). The subcommittee’s memo explaining the three proposals is here, and for those who are interested, you can watch a live stream of the subcommittee hearing tomorrow at 2 pm (US East Coast time) here.

For what it’s worth, a few scattered thoughts on each of these proposals: Continue reading →