Now That The ‘Koala Kuddles’ Are Over, Here’s What The G20 Agreed On Beneficial Ownership

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(Aussie PM Tom Abbott and US President Obama)

Don’t expect much by way of surprises because the October 22-24 Financial Action Task Force (FATF) meeting and the OECD Global Forum on Transparency and Exchange of Tax Information Berlin plenary, also held this past October, provided some useful sign-posts to what G20Brisbane would be minded to agree to.

Importantly, now that one of its members, the United Kingdom, has finally gotten rid of ‘bearer shares’- almost twenty years after the OECD called on tax havens to do so – the G20 High Level Principles on Beneficial Ownership Transparency inludes  the expected ‘beefed up’ language in this regard.

A conspicuous though not unexpected absence is agreement on public registries of beneficial ownership with consensus reached only on such registries being made accessible to law enforcement, tax authourities, finanical intelligence units and their international counterparts.

The requirement to provide ultimate beneficial owner information has also been extended, if somewhat more tentatively, to trusts and foundations. See my earlier predictions on this here.

Here now are the ten (10) principles G20Brisbane have agreed:

  • Countries should have a definition of ‘beneficial owner’ that captures the natural person(s) who ultimately owns or controls the legal person or legal arrangement.
  • Countries should assess the existing and emerging risks associated with different types of legal persons and arrangements, which should be addressed from a domestic and international perspective.Appropriate information on the results of the risk assessments should be shared with competent authorities financial institutions and designated non financial businesses and professions (DNFBPs) and, as appropriate,other jurisdictions. Effective and proportionate measures should be taken to mitigate the risks identified.
  • Countries should identify high risk sectors and enhanced due diligence could be appropriately considered for such sectors. Countries should ensure that legal persons maintain beneficial ownership information onshore and that information is adequate, accurate, and current.
  • Countries should ensure that competent authorities (including law enforcement and prosecutorial authorities, supervisory authorities, tax authorities and financial intelligence units) have timely access to adequate, accurate and current information regarding the beneficial ownership of legal persons. Countries could implement this, for example, through central registries of beneficial ownership of legal persons or other appropriate mechanisms.
  • Countries should ensure that trustees of express trusts maintainadequate, accurate and current beneficial ownership information, including information of settlors, the protector (if any) trustees and beneficiaries. These measures should also apply to other legal arrangements with a structure or function similar to express trusts.
  • Countries should ensure that competent authorities (including law enforcement and prosecutorial authorities, supervisory authorities, tax authorities and financial intelligence units) have timely access to adequate, accurate and current information regarding the beneficial ownership of legal arrangements.
  • Countries should require financial institutions and DNFBPs, including trust and company service providers, to identify and take reasonable measures, including taking into account country risks, to verify the beneficial ownership of their customers. Countries should consider facilitating access to beneficial ownership information by financial institutions and DNFBPs. Countries should ensure effective supervision of these obligations, including the establishment and enforcement of effective, proportionate and dissuasive sanctions for non-compliance.
  • Countries should ensure that their national authorities cooperate effectively domestically and internationally. Countries should also ensure that their competent authorities participate in information exchange on beneficial ownership with international counterparts in a timely and effective manner.
  • Countries should support G20 efforts to combat tax evasion by ensuring that beneficial ownership information is accessible to their tax authorities and can be exchanged with relevant international counterparts in a timely and effective manner.
  • Countries should address the misuse of legal persons and legal arrangements which may obstruct transparency, including: a.prohibiting the ongoing use of bearer shares and the creation of new bearer shares, or taking other effective measures to ensure that bearer shares and bearer share warrants are not misused; and b.taking effective measures to ensure that legal persons which allow nominee shareholders or nominee directors are not misused.
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