(Christine Legarde (Managing Director , IMF)
In the shadow of the Panama Papers the EU has reached agreement on the sharing of beneficial ownership information related to trusts and companies. Following UK Prime Minister, David Cameron’s commitment at the end of the G8 Summit in 2008 to create a UK beneficial ownership register that would be ‘public’; some time afterwards the EU announced that its members would be free to set up their own registers with public access to the information left to the discretion of the member states.
Reaction to the EU announcement has been tepid among AML (Anti-Money Laundering) circles because the entries in the registers are not going to be verifiable by an external source. This is because the The EU is not asking its members to include any verifying details on their registers of the kind that money-laundering reporting officers need when conducting ‘know your customer’ or ‘customer due diligence’ procedures.
Moreover, holdings under 25 per cent in companies and certain trusts are not disclosable.
I suppose we should be grateful that the threshold is so low because back in 2005 the thinking then, lead by former Italian President Silvio Berlusconi was that the threshold should be nearer to 100!
Aside from the fact that even with beneficial ownership of the kind agreed to by the EU, the UK version, and the ones that are hastily being put together so that countries do not face G20 -blacklisting(at least in this regard) the issue of confidentially remains to be tackled.
This is especially relevant in in light of the unprecedented breach that gave access to the public’s access to 11.5 million items of confidential client affairs spanning a period from 1974 to 20015. Now established that this historic breach was not the work of of an indignant ‘whistle-blower’, as some would have wished to believe, but rather an external breach according to the firm whose client accounts were compromised.
Despite claims that the UK version will be ‘public‘ the understanding thus far is that the information will be ‘open’ to law and regulatory enforcement officials only and not the proverbial ‘reasonable man on the Clapham omnibus’!
It has been argued that the concerns about privacy is not on ‘all fours’ with that which the US has staked its right not to exchange information on a multilateral basis in accordance with the same ‘universal’ standard that Panama has been accused of being deliberately and willingly recalcitrant in adopting. Whether the information is housed, captured or exchanged within in the public or private sectors the salient point is that the integrity of the information being exchanges whether by bilateral treaty or multilateral convention, confidentiality is a key pillar upon which the new exchange of information and transparency standards will stand or fall.
With legitimate privacy concerns and question marks about the ability to verify the information recorded in the registers, last week at the the in the tepid response to the EU announcement is succinctly captured in this statement by Pekka Dare, the money-laundering training specialist at International Compliance Training, who lectured at the International Compliance Association’s conference in London last week:
“with no apparent verification of the information submitted by corporate entities, the actual reduction in the amount of criminal abuse of corporate structures is likely to be limited. So the onus will remain on regulated firms and those working in AML roles.”
In light of the fore-going , the question then becomes are the proposed beneficial ownership registers present any ‘value-added’ and if not could they be used to provide another means of populating lists which though not definitely rejected by the World Trade Organisation in the Panama-Argentina dispute 2015 does leave the door open for another panel to consider this proposition as WTO dispute panels are not bound by the legal principle of ‘stare decisis‘, which dictates that determining points in litigation according to what has been decided by previous courts where the facts and circumstances are comparable.