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Anonymous company ownership helps hide foreign bribery. The OECD should promote transparency

Gillian Dell

Ten years ago this week, on International Anti-Corruption Day 2009, the OECD Working Group on Bribery (WGB) released its Revised Recommendation for Further Combating Bribery of Foreign Public Officials (the 2009 Anti-Bribery Recommendation). This was designed to enhance the prevention, detection and investigation of foreign bribery, by making recommendations in a number of areas not covered by the OECD Anti-Bribery Convention itself.

Since 2018, the OECD WGB has been conducting a review of that recommendation, including holding several consultations with organisations like Transparency International.

We welcome that review. Ten years after being adopted, the Anti-Bribery Recommendation should be significantly enhanced and strengthened with an extended framework. One major improvement would be to encourage transparency of the beneficial ownership of companies and trusts — a key measure for the prevention, detection and investigation of foreign bribery.

The problem: secret ownership of companies and trusts

Secret ownership of companies and trusts is an obstacle to the prevention, detection and investigation of corrupt transactions, including laundering of the proceeds of crime in foreign bribery cases. The OECD itself has revealed the importance of this subject for foreign bribery enforcement through the many cases involving anonymous shell companies in its Phase 3 and Phase 4 country reports monitoring the OECD Anti-Bribery Convention.

Public central registers of beneficial ownership information would reduce bribery and money laundering opportunities and enhance detection and investigation in foreign bribery cases. Transparency International has proposed standards and conducted monitoring on this subject over a period of years. We included a proposal on this subject in the 2018 Exporting Corruption Report on enforcement of the OECD convention.

The proposal: The OECD WGB should add a new recommendation on beneficial ownership transparency to the new Anti-Bribery Recommendation

The OECD WGB should add a new recommendation on beneficial ownership transparency to the Anti-Bribery Recommendation. It should encourage parties to the OECD Anti-Bribery Convention to introduce public central registers containing beneficial ownership information. The recommendation should reference best practice and guidance available in this area. The subject should be systematically reviewed by the OECD WGB.

More specifically, in line with emerging best practice, as proposed by the BOND group, registers should be made publicly available via searchable web interface, as well as with structured data in a machine-readable format. They should be available under open data licences. In addition, the recommendation should require State Parties to:

  • ensure all beneficial owners report their holding of shares or voting rights in exact percentages;
  • use unique identifiers in addition to personal data such as name and month and year of birth;
  • use data validation systems such as multiple choice fields to improve data quality; and
  • ensure systems are in place to identify potential non-compliance and pro-actively pursue and sanction companies that report non-compliant data.

If the beneficial ownership registry is not accessible to the public, the WGB should recommend that the legal framework clearly defines that relevant authorities have access to beneficial ownership information and can carry out necessary searches.

Building momentum

Standards for beneficial ownership transparency has been proposed in other forums including by the FATF, the G20 and the EU. If the OECD WGB were to address the issue, it would not only shine a spotlight how concealment of beneficial ownership information can hinder foreign bribery enforcement, it would increase momentum for improvements in this crucial area of anti-corruption work.

Moreover, as noted above, such a recommendation would logically follow from findings in the OECD’s own Phase 3 and Phase 4 country reports, as indicated by the two examples below.

UK

The OECD WGB Phase 4 report on the UK in March 2017 noted that the UK’s public central register of company beneficial ownership information, which was launched in October 2016, was “one of the initiatives that should make it easier to investigate the complex web of financial structures commonly associated with foreign bribery cases.”

The report also recommended maintenance of beneficial ownership registers in the UK Overseas Territories accessible to UK enforcement authorities.

In its follow-up report on the UK in March 2019, the OECD WGB noted as a positive development “the deployment of private central registers of company beneficial ownership or similarly effective systems in all three Crown Dependencies and in the Overseas Territories with major financial centres, which are now effectively sharing company beneficial ownership information with UK law enforcement agencies and tax authorities.”

Czech Republic

Similarly, the OECD WGB Phase 4 review of the Czech Republic in June 2017 noted that since Phase 3, the Czech Republic had taken a number of initiatives to make information about business transactions more transparent and easily accessible to specified stakeholders in the form of three principal registries — beneficial ownership, bank account, and contracts. It found that these initiatives had the potential to make foreign bribery and related investigations more efficient. The evaluation team determined that the Beneficial Ownership Registry could provide significant added value, but it was still under development, and potential problems had been identified that could undermine its use in foreign bribery investigations. The review decided to follow up on the use of the three registers in foreign bribery investigations.

These reviews highlight the importance of beneficial ownership registries. They show precisely why this topic should be added to the new Recommendation and systematically covered in all the OECD WGB’s subsequent country reviews.

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