(C) Transparency International
This story was originally published by Transparency International and is unaltered.
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CPI 2022: Trouble at the top - News [1]
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Date: 2023-11
In many of the high-performing countries on the CPI, financial secrecy has been at the heart of the business model for attracting foreign investment. It is also one of the biggest obstacles to fighting globalised corruption, preventing even the most willing law enforcement agencies from investigating suspicious wealth.
A great illustration of this problem is the Russian Asset Tracker, compiled by the Organized Crime and Corruption Reporting Project (OCCRP), where only two of the 149 listed assets appear to be registered to sanctioned individuals. For all others, information on the real owners of yachts, villas and private jets has been diligently obscured under layers of secrecy.
Setting up and incorporating anonymous legal entities has been notoriously easy in Hong Kong (76), whose government’s decision to not sanction Kremlin-linked Russian elites makes it one of the key financial centres to watch. However, it is not just Russian kleptocrats who abuse this system. Last year, an investigation by OCCRP and the Toronto Star found that a man implicated in one of China's biggest military corruption scandals allegedly used Hong Kong-registered shell companies to invest millions in luxury real estate in Canada.
In response to demands from civil society and international pressure, most advanced economies have in recent years pledged to embrace beneficial ownership transparency – the principle that no one should be able to hide behind anonymous companies. Nonetheless, progress has been slow and uneven. The new global standard on transparency in company ownership – adopted in March 2022 following our campaign – addresses this by requiring all countries to set up central registers to record the real individuals who own or control legal entities.
In order to comply with the new standard, Switzerland has finally announced that it will establish a register of companies’ beneficial owners. While this is welcome, the Swiss government should not stop halfway: it can and should make its forthcoming register available for public scrutiny.
Public beneficial ownership registers have been gaining prominence as a critical tool for deterring cross-border corruption, but they also help to prevent corruption in the public sector and enhance trust in government-business transactions.
The European Union (EU) – home to many of the top-scoring countries – recognised this as early as 2018 when it required all member states to open up their registers to the public, with visible impact. However, at the end of 2022, the EU’s highest court delivered a surprise ruling which invalidated the anti-money laundering provision guaranteeing public access to information on companies’ real owners. Some countries almost immediately shut down public access to their registers, making the already difficult task of tracking down illicit funds in the EU – including those belonging to sanctioned Russians – significantly harder.
One of the countries that quickly suspended its register is Ireland (77). This will further reduce the country’s resilience to dirty money. Ireland already scored poorly on financial secrecy due, among other reasons, to complete opacity when it comes to ownership of special purpose vehicles such as limited partnerships, which have fallen outside the scope of company beneficial ownership disclosure.
As it happens, EU anti-money laundering rules are currently undergoing another revision. Policymakers need to use this opportunity to urgently prescribe how civil society, media and other stakeholders will be granted access to information on companies’ real owners.
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[1] Url:
https://www.transparency.org/en/news/cpi-2022-trouble-at-the-top
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