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UNGASS 2021: Bold actions to stop the flows of dirty money or more of the same?

Photo: Drop of Light on Shutterstock

Maíra Martini

Last week, governments gathered for the first-ever UN General Assembly Special Session (UNGASS) against corruption. This could have been an opportunity for the more and the less advanced economies to come to the table and discuss bold improvements to the current international anti-corruption framework and architecture. It fell short.

In the three days of the UNGASS 2021, we watched governments highlight the importance of anti-corruption measures for effectively dealing with the COVID-19 pandemic, for improving their countries’ economies and for achieving the sustainable development goals. We also heard them talking about the measures they have been taking to control corruption and put an end to impunity. The truth, however, lies somewhere in the middle.

During the preceding months, country delegates met several times to discuss their role in advancing the global fight against corruption and ways to reflect those ambitions in the UNGASS 2021 political declaration. While civil society cannot participate or even be in the room during these negotiations, what we heard is that, very often, governments’ positions were less enthusiastic and progressive behind closed doors. It is not a surprise that the final political declaration ended up looking more like a “diplomatically-worded statement,” as the UNCAC Coalition put it.

The political declaration, adopted by UN member states after arduous negotiations, largely does not go beyond the measures that had already been agreed in previous UN documents. There are a few areas, however, where the discussions – and persistent advocacy – preceding the Special Session helped to secure stronger commitments. One of them is beneficial ownership transparency.

The standard we have is not enough

Although crucial in the fight against corruption, transparency in company ownership is an area where global standards and commitments do not go far enough.

The UN Convention against Corruption (UNCAC) calls on state parties to promote “transparency among private entities, including, where appropriate, measures regarding the identity of legal and natural persons involved in the establishment and management of corporate entities.”

The Financial Action Task Force (FATF), the global anti-money laundering standard-setting body, provides only broad recommendations when it comes to beneficial ownership transparency. As a result, authorities in the great majority of countries still face challenges in accessing information on the real owners of companies and other legal vehicles, a difficulty that hampers the detection and investigation of corruption.

The analysis of FATF mutual evaluation reports leaded Transparency International to conclude that it is time for FATF to review its standards and guidance documents, and provide more detailed recommendations on what is necessary to ensure competent authorities have access to reliable and accurate information on beneficial ownership in a timely manner.

Who is Behind the Wheel? Fixing the Global Standards on Company Ownership

The problem has been known for years but there is finally a growing recognition of the inadequacy of international standards. FATF is currently undertaking a review of its beneficial ownership recommendations. The report published earlier this year by the High-level Panel on International Financial Accountability, Transparency and Integrity (FACTI) recognised the need for a global anti-money laundering requirement for all countries to create a centralised registry for holding beneficial ownership information on all legal vehicles, with an encouragement to make the information public.

Not a promising start

The UNGASS discussions on beneficial ownership transparency were not very promising at the start. Earlier versions of the political declaration simply repeated the text of the UNCAC. Reportedly, there was strong opposition to including more concrete commitments, even from those countries that recently adopted stricter rules on company ownership themselves.

The final text is therefore a positive surprise. Although not ideal, we are pleased to see a commitment in the political declaration that goes beyond what was previously agreed in UN documents and even as part of the FATF standards.

With the UNGASS political declaration, in addition to taking appropriate measures to enhance beneficial ownership transparency by ensuring that competent authorities have access to adequate, reliable, and timely beneficial ownership information, countries also commit to promoting beneficial ownership disclosure and transparency, such as through appropriate registers.

We commit to making efforts in international cooperation and taking appropriate measures to enhance beneficial ownership transparency […] by promoting beneficial ownership disclosures and transparency, such as through appropriate registries […]
UNGASS 2021 political declaration

This shows that civil society pressure and the persistence of more progressive government leaders can help to push even those more reticent countries to agree to bolder reforms.

Earlier in the year, Transparency International submitted – on behalf of more than 700 signatories from the academia, civil society as well as the public and private sectors – a petition calling on the UNGASS to commit countries to establish public beneficial ownership registers. Together with partner organisations and governments, we also held a briefing session for UNGASS delegates to discuss the need for stronger measures around company ownership.

The work isn’t done yet

The political declaration is a step in the right direction, but countries need to go another leap further. In order to improve international cooperation, it is crucial to set up publicly accessible beneficial ownership registers.

This will ensure that foreign competent authorities have direct access to beneficial ownership information. Opening up registers also allows citizens, civil society, media and businesses to scrutinise the information, contributing to the accuracy of the data and increased trust in businesses and financial transactions.

Equally important will be to ensure that the information disclosed is accurate and reliable. Verification mechanisms, sanctions for non-compliance or feeding false information, coverage exceptions are among the issues that should be carefully considered by governments when implementing this commitment.

Translating the political declaration commitment on beneficial ownership transparency into action, and doing so in a timely manner, will be crucial for tackling corruption and other financial crimes. To that end, governments should publish an action plan with detailed information and timelines on the measures they will put in place to implement the commitments, including on plans to set up beneficial ownership register or strengthen existing ones.

They need to also consult with the public, civil society and the private sector on the best model to be implemented in the country, taking into account the country’s specific context and money laundering risks. Most urgent, however, is that governments support a meaningful review of the FATF standards. Tackling cross-border corruption requires a global level playing field. Reforming the current global anti-money laundering standards is an opportunity to ensure minimum requirements are applied across countries and that guidance on effective models to ensure the timely access to accurate and reliable beneficial information is in place so that countries can be assessed against concrete expectations.