Today in London at the Open Government Partnership Summit, Prime Minister Cameron announced his government’s plans to make public, national registers of the ‘true’ , ‘shell’, ‘real’ or ‘beneficial’ owners of companies.
In the company of the Presidents of Tanzania and Liberia, Cameron said that “a list of the owners of “shell” companies where firms keep money offshore to avoid tax will be published to discourage tax evasion.”
He went on to say that, “the cloak of secrecy surrounding company ownership had lead to questionable practice and downright illegality”; and that “illegality that is bad for the developing world – as corrupt regimes stash their money abroad under different identities…is bad for Britain’s economy too – as people evade their taxes through untraceable trails of paperwork.”
No Tax Base – No Low Tax Case
Using this new mantra – also unveiled today – in making the case for the adoption of similar legislation by his G20 colleagues, Cameron has seemingly positioned publicly accessible registers as the solution to all that ails the developing world by commenting that “the UK is helping deprive corrupt politicians and criminals of the use of anonymous companies to hide their real identities. This will go a long way in curbing corruption, money laundering, drug trafficking, tax evasion and financial crime responsible for the continued loss of much needed wealth from the world’s poorest countries.”
G8UK Transparency Agenda
Cameron has been talking about public registers of beneficial owners even before he hosted this year’s G8 Summit in Northern Ireland. His 3T agenda, based on tax, trade and transparency was the forerunner to this year’s endorsement by the G20 of automatic exchange of tax information as the new global standard which the OECD Global Forum has been charged with implementing; thereby supplanting the existing rule that advocates treaty-based bilateral exchanges ‘on request’.
Cameron also registered some success under the second ‘T’ – trade – with the recent launch of EU-US Free Trade talks, even as concerns about the usual French ‘sensitivities in the areas of culture and farming subsidies were raised.
Now with his announcement that, not only is the UK going to establish a public register of the ultimate or ‘true’ owners of companies, but these registers to be available for public scrutiny, Cameron is trying to gain traction in the third part of his ambitious G8UK agenda.
It turns out that there is cause for Cameron to speak so boldly about the accessibility of public registers as this British initiative comes as the EU considers amending its anti-money laundering directive to tighten loopholes and demand that natural beneficial owners of corporations be named in a public registry.
It has also been reported that France is considering similar measures.
Even the Obama administration has promised to take action on beneficial ownership as part of its commitment under the transparency initiative called Open Government Partnership. Congress is considering legislation to create private corporate registries at state level.
Of course no word yet from other G8 members most notably Russia and Canada whose response to Cameron transparency agenda was lukewarm at best.
Who’s the ‘real’ owner anyway?
In circumstances when the UK still permits the holding of ‘bearer shares’ facilitating the opacity of company ownership, Cameron’s talk of transparency and public access was perhaps understandably greeted with horror by the ‘suits’ in London.
It is true however that the Cameron has also announced his government’s intention to abandon this lucrative plank Britain’s business brand, more than fifteen years after legitimate offshore financial centres outlawed the practice.
Unfortunately, banning proof of company ownership by the mere possession of an anonymous share certificates isn’t much help in exposing the true beneficiaries of company ownership.
In fact, while in the afterglow of the Northern Ireland Summit, UK’s overseas dependencies and the US published national action plans to give effect to the creation of registers to log the real owners of corporate vehicles, these plans do little to clarify the metrics required to determined how such a determination would be arrived at, given the several degrees of separation which can remove the company from its true owners.
But how would it work?
Nobody’s sure yet but possibilities include cross-referencing with other databases such as those held by the Passport Office and the electoral register. Alternatively, or perhaps additionally, companies could be asked to provide identification information for beneficial owners such as a national insurance number and date of birth.
What is clear however is that firms registered in Britain will come under a legal obligation to obtain and hold adequate, accurate and current information on the ultimate owner who benefits from the company – and be required to place the information on a central register that would be maintained by Companies House.
What about trusts?
…to be continued.