TI: BORs

NEEDED:

• embedding verification elements into BOR design 
• ensuring that regulatory arbitrage is avoided.

BO =

HUMAN who owns/benefits/controls (directly or indirectly) a company or contract

BO may differ from the company’s legal owner, who may in reality have little or no control. Complex and opaque corporate structures set up across different jurisdictions make it easy to hide the BO, especially when nominees are used in their place and when part of the structure is incorporated in a secrecy jurisdiction

why bors are good:

1. Public BORS also allow direct access by entities and professionals with anti-money laundering obligations, not only supporting due diligence, but also ensuring the data is cross-checked against information provided by customers

3/ bors allow domestic law enforcement and other competent authorities to investigate criminal activities and detect wrongdoing. In addition to assisting public authorities, public registers allow banks, corporate service providers, lawyers, accountants and real estate agents, and other professionals with anti-money laundering obligations to easily check information when conducting due diligence, wherever they are located. Public registers also allow for greater oversight by civil society and journalists to uncover criminal activity as well as hold individuals and governments to account for (in)action on corruption, money laundering and tax evasion, thereby assisting public authorities to fulfil their duties

4/ bors help deter crime by making it more difficult for the corrupt and other criminals to hide their operations and money flows behind anonymous companies

5/ bors allow foreign competent authorities to investigate cross-border cases and track illicit financial flows and activities, facilitating international cooperation and information sharing

6/ bors facilitate greater prosperity by contributing to a more open investment regime and by ensuring value for money in public procurement. This includes bolstering customer due diligence in the private sector, establishing a level playing field and fostering open competition 

International policy frameworks

BO transparency has been promoted in various international policy fora since 2010

There is now widespread recognition that bo information is a public good

In 2014, the G20 : Principles of BO Transparency = The FATF Standards: g20 countries must ensure that competent authorities, such as law enforcement, financial intelligence units and tax agencies, have access to or the ability to obtain adequate, accurate and timely information on the bo and the control of companies and other legal persons in a timely fashion

FATF bo best practices guidelines (2019) :

country experience demonstrates that using a single approach [to bo transparency], is insufficient and ineffective. Instead, it advocates for a multi-pronged approach, using a variety of information sources, which is more effective, increases transparency and access to accurate information.

transposing the EU Anti- Money Laundering Directive, the UK became the first country in the world to set up a public register of companies’ bos

members of the Open Government Partnership (OGP) have made bo commitments…eg: extractives Industry Transparency Initiative (EITI) 

Eu standards:

stem from the Fourth and Fifth EU Anti-Money Laundering Directives (AMLD)

The 4AMLD :   Member states had to introduce bors in 2017 to be accessible to persons with a “legitimate interest”. This was updated in 2018 with the introduction of the 5AMLD, which mandated that Member states establish centralised bors for companies that are available to the public. also, bors

for trusts and similar , must be accessible to competent authorities and those with *legitimate interest

** ‘’Legitimate interest’’:  those who can justify their interest in money laundering, terrorist financing and the associated predicate offences

Sectoral interventions: eg. EITI

EITI collects and publishes bo info in annual EITI reports. In 2016, the 51 EITI members agreed to a new rule that all oil, gas and mining companies operating in their territories, must disclose their bos in established registries 

many implementing countries have yet to fulfil this requirement

<> cocoo v these countries

uk and Ukraine, have established public registers . ALSO:

 In 2020, the government of Myanmar and Myanmar EITI colaunched a new BOR for owners of companies active in the extractives sector. This registry allows users to search a database of companies in mining oil and gas, for:  the statutes; mission statements of NGOs; or evidence of previous activities in countering money laundering and terrorist financing identities of individuals owning shares of 5% or higher. They asked 163 extractive companies to disclose their beneficial owners through an online form, with 121 companies (of which four were SOES (state-owned enterprises) submitting information about their ownership structures 

In 2019, Nigeria became the first African country to successfully publish a public BOR, focused on the extractives sector, including information on licensing data. This register consists of 56 companies in the extractives industries, and has been built using data from EITI reporting and other government registers. Although this register is currently limited to the extractives sector, Nigeria also made a commitment to introduce a public centralised BOR, at the London Anti-Corruption Summit in 2016.

In 2018, the Kyrgyz parliament passed the “On Subsoil” law, requiring companies to disclose their BOS, when applying for, or holding , an extractives licence. In the same year, Open Ownership conducted an extensive review of progress on registers, and commended their progress. However, Open Ownership also highlighted the need for the Kyrgyz Republic and other countries to consider how data will be collected and used ex-ante, as well as the importance of verification systems to validate the BO info submitted.

Finally, the review highlighted the need for CGC (cross-gov coordination), throughout the design and implementation of a BO regime

EG:  by electronic linking of the new registers with existing other datasets, such as land and vehicle registries and data from tax administrations 

EG: Slovakian BOR, established in 2015 for companies participating in public procurement processes

Progress,  by secrecy jurisdictions

Secrecy jurisdictions, in the Tax Justice Network’s Financial Secrecy Index (FSI), have shown slower progress in implementing registers. Although the UK has perhaps made the most progress in this area, its Crown Dependencies and Overseas Territories have moved at a slower place. For example, the islands of Jersey, Guernsey and the Isle of Man have introduced registers but will only make them publicly available in 2023. The three islands are well known as part of a larger network of havens for illicit financial flows. The same is true for the British Virgin Islands and the Cayman Islands

<> COCOO WILL INVESTIGATE THESE ISLANDS’ NEW BOR

Lichtenstein (a eu member and tax haven), was required to implement a BOR, under the 4AMLD. …it did, but the bor is not open to the public, only to enforcement agencies and third parties considered to hold a legitimate interest

<> COCOO WILL APPLY AND SHOW THAT LEGIT.INT.

Panama also adopted a private BOR in 2020. This requires corporate service providers (resident agents) to provide BO info on their clients to the register. This is only accessible to competent authorities, resident agents and registered legal entities 

Implementation effectiveness

TI-UK Pledge Tracker:  analysises the implementation of the UK Anti- Corruption Summit commitments…. shows that 83% of BOR commitments are already underway, ongoing or complete 

EU Member states were supposed to transpose the 5AMLD, establishing centralised, publicly accessible registers for companies by January 2020….BUT…the great majority of Member states have failed to do so. Only five have completed this process within the prescribed timeline: Bulgaria, Slovenia, Denmark,Latvia and Luxembourg… Of the 27 Member states, 17 do not yet have a public centralised register.

public access to bors in many countries are hindered by:

• paywalls
• strict registration requirements
• restrictive search functions
• delays to the deadlines for companies to start providing BO info, or for authorities to start sanctioning failures to comply 
• lack of technical capacity and coordination on the government side 
• failure to publish contracts

Cost effectiveness

public BORS, result in significant savings for government, far outweighing their cost of implementation EG. cost in police time saved

<> COCOO WILL PRESS FOR MORE AND BETTER BORS, IN THE WPI

uk bor

in the UK, the FATF Mutual Evaluation Report (MER):    NGOs have undertaken bulk data analysis and reported potential inaccuracies. This led to the identification of approximately 4,500 companies listing other companies on the Persons of Significant Control (PSC) register in situations where this was not permitted, which in turn prompted Companies House to take action against these companies

Dissuasive sanctions

the FATF :  the BOR best practice guidelines recommend sanctions

A. administrative sanctions…eg. rejecting registrations; refusing to proceed with a requested activity until all requested information is submitted. For example, entities that fail to file the relevant beneficial ownership information may not be allowed to register as a company until they comply

B. Sanctions for impartial/no compliance may also include fines and prosecution, including criminal sanctions

<> cocoo will seek sanctions v firms failing to properly comply with BOR rules.

CASES WHERE BOR HELPED

In the Czech Republic, TI-CZ was able to show Prime Minister Andrej Babiš was a controlling entity of Agrofert. As the sole beneficiary of two trust funds that owned 100% of the shares of Agrofert, Babiš was able to receive millions of euros in subsidies from the EU every year, which  EC ruled to be a COI

Investigations into the offshore finance industry following the Panama papers have helped to recover over US$1.2 billion around the world through raids, fines and audits. This case further highlighted the detection and asset recovery-potential for BORS. Investigation and asset recovery efforts around the Paradise Papers are also still underway, with the Lithuanian authorities recently revealing that these leaks helped to expose US$45 million stolen from Ukio Bankas by its former owner, Vladimir Romanov 

More recently, the Luanda leaks have highlighted how Isobel dos Santos used secretive companies in the UK’s Overseas Territories and Crown Dependencies to amass a fortune of GB£1.7 billion, which was then invested into a range of high-value assets including property in London and artwork