Reforming global standards on beneficial ownership transparency
The corrupt should not be able to hide behind anonymously owned corporate structures. Following our campaign, every country will have to set up a dedicated register to allow authorities to see who ultimately owns or controls companies. Now, it’s time to tackle secretly owned trusts.
Illustration: Transparency International
Almost without fail, anonymous companies and trusts appear at the centre of major cases of corruption, money laundering and tax evasion. Such secretive structures serve as tools to divert critical public resources – to the detriment of communities and populations. Even when corruption and money laundering schemes are exposed, the lack of transparency in company ownership means that law enforcement agencies cannot track down individuals behind the companies and trusts suspected in financial crime.
Countries should create centralised, public registers of beneficial ownership with verified information on who ultimately owns or controls these structures. These would allow everyone to see who’s hiding behind anonymous companies and trusts – and help authorities, journalists and civil society to more effectively expose and fight corruption, money laundering and other financial crimes.
Where we are now
Government leaders have for years pledged to end the abuse of anonymous companies, trusts and other opaque corporate structures. In practice, they have long resisted reforms.
In 2019, Transparency International asked the Financial Action Task Force (FATF) – an intergovernmental body and anti-money laundering watchdog – to fix the global standard on beneficial ownership transparency for companies. We specifically called for public, central registers as a key measure to end the decades-long abuse of anonymous companies around the world.
In October 2021, FATF finally came around and agreed to propose much-needed amendments to the global standard. During their plenary – which took place from 21 February to 4 March 2022 – FATF's 39 voting members voted to adopt the proposed measures.
Progress: FATF adopts new standard on transparency in company ownershipOur reaction
In June 2022, FATF launched the process for revising the global standard on beneficial ownership of trusts.
How we got here
Transparency International's national chapters and partners in 12 African countries write to FATF. "To support African continent in its fight against capital flight, ensure that revised Recommendation 24 requires centralised, public registers of beneficial ownership," reads the letter.
On 21 February, FATF Plenary and Working Group Meetings kick off in Paris. During these meetings, FATF members – 37 countries and 2 regional organisations – are expected to deliberate and vote to decide what the new global standard will look like under Recommendation 24, which requires countries to ensure that competent authorities have timely access to adequate, accurate and up-to-date beneficial ownership information.
Transparency International and our chapters send an open letter to FATF's voting members, urging them to support bold and ambitious measures to advance the global fight against corruption.
When you deliberate and vote to decide what the new global standard will look like under Recommendation 24, we urge you to bear in mind that you have a historic opportunity and responsibility to end the decades-long abuse of anonymous companies around the world.
FATF announces that it has adopted the new standard. We welcome the information released so far. While years too late, the stronger standard comes at a critical time – just a week after Russia’s invasion of Ukraine, in response to which several countries in the West announced a new wave of targeted sanctions against Kremlin-linked individuals and companies.
Today’s reform, while welcome, arrives a decade too late. If countries had created beneficial ownership registers years ago – when many governments promised to do so – Russian kleptocrats would have had a much harder time moving their dirty money across borders.
FATF announces that it is considering the revision of Recommendation 25 on trusts and releases a white paper for public consultation.
Transparency International submits extensive comments in response to FATF’s public consultation.
In our submission, we detail challenges to trust transparency and recommend, among other things, that the new standard require mandatory registration of trusts, disclosing all parties to the trust along with their beneficial owners and applying a multi-pronged approach for accessing and using ownership information.
Ahead of the FATF plenary, Transparency International issues a list of key fixes to the global standard and urges the membership to consider them carefully before drafting amendments.
As worldwide scrutiny over anonymous companies intensifies, reforming the global standard on trust ownership is critical for deterring cross-border corruption.
Transparency International submits its responses to two FATF public consultations, providing our feedback on the draft guidance for the revised Recommendation 24 (beneficial ownership transparency of companies) and on proposed amendments to Recommendation 25 (beneficial ownership transparency of trusts).
The US Congress passes the historic Corporate Transparency Act into law, which will see the establishment of a central register of beneficial owners in the country.
24 February. Transparency International submits the multi-stakeholder petition on behalf of 700 signatories from 120 countries to the United Nations. Representatives from the academia, civil society as well as the public and private sectors joined us in calling on the UN member states to commit countries to establish public beneficial ownership registers.
25 February. The UN High-Level Panel on International Financial Accountability, Transparency and Integrity for Achieving the 2030 Agenda (FACTI Panel) issues its final report, calling for a new global standard on beneficial ownership transparency. They agreed with us – beneficial ownership registers need to be a requirement.
Transparency International's CEO, Daniel Eriksson writes to the FATF President, Dr. Marcus Pleyer to bring to his attention the call for central, public registers from 700 signatories to our UNGASS petition. The letter also urges FATF, as the global standard-setter on anti-money laundering, to lead the way and put forward requirements that are fit-for-purpose.
The government of Canada announces that it will set up a publicly accessible beneficial ownership register by 2025.
Transparency International representatives in each G7 country call on the Finance Ministers and Central Bank Governors, when they meet in coming weeks, to place particular emphasis on measures for tackling corporate secrecy. The G7 Finance Ministers and Central Bank Governors should explicitly, and without mincing words, endorse the global adoption of beneficial ownership registers to prevent kleptocrats from undermining an inclusive recovery from COVID-19, signatories say.
🔴 JOINT LETTER: When they meet tomorrow & early next month, @G7 Finance Ministers should explicitly endorse the global adoption of #beneficialownership registers – especially in light of resistance within #FATF to change the status quo: https://t.co/99X7fCvT0d #G7UK https://t.co/Jt8Uot57NO — Transparency International (@anticorruption) 27 May 2021
2-4 June. The UN General Assembly Special Session (UNGASS) political declaration is adopted (see also: December 2020 and February 2021). The final text – while not ideal – includes a commitment that goes beyond what was previously agreed in UN documents and even as part of the FATF standards. In Transparency International's view, the political declaration is a step in the right direction, but countries need to go another leap further.
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 […]
5 June. Following their meetings, G7 countries commit to establishing and strengthening beneficial ownership registers, and calling on countries across the globe to implement and strengthen FATF standards. This is a big shift in the Group's position on the issue (see also: May 2021).
25 June. Major news come from FATF. Following a plenary meeting, members agree to release a white paper for public consultation to receive inputs on ways to strengthen the global standard on beneficial ownership transparency, laid down in FATF's Recommendation 24.
The European Commission proposes a new anti-money laundering package with measures to strengthen public registers across the European Union.
Transparency International proposes specific ways to change the global standard on beneficial ownership transparency. We submit to FATF detailed recommendations, endorsed by Transparency International chapters and partners from 30 countries.
Key fixes to make the new standard effective include: making beneficial ownership registers a requirement, clearly defining “beneficial ownership” and requiring independent verification of beneficial ownership data.
9 September. Under UK's G7 Presidency, commitments by the Group's Interior and Security ministers include beneficial ownership registers and strengthening of the FATF's standards.
27 September. The UK government, Transparency International and the Open Government Partnership co-host a consultation with civil society and private sector representatives on anti-corruption to feed back to G7 governments. There was consensus among participants that "collecting, verifying and publishing information on beneficial ownership is a key priority of especial relevance given ongoing consideration" at FATF.
3 October. The Pandora Papers investigations are released. The secret documents reportedly show high-level officials, oligarchs and billionaires moving wealth offshore while concealing their identities, buying real estate and luxury goods – all with the help of anonymous shell companies. Transparency International strengthens its call for public, central registers of company owners in all countries, including as a solution to prevent jurisdiction-shopping seen in the Pandora Papers reports.
Ironically, political leaders who should be taking action to tackle the flows of dirty money have themselves been abusing the system’s opacity and benefitting from the status quo. In the months to come, they will have a lot of explaining to do – to the public and hopefully also to the authorities.
13 October. G20 Finance Ministers confirm their support for strengthening of the FATF recommendations to improve beneficial ownership transparency.
21 October. Following a three-day plenary, FATF proposes amendments to the global standard on company ownership. In Transparency International's view, the draft revisions have the potential to significantly strengthen countries’ resistance to dirty money. FATF opens another public consultation.
Most notably, FATF is finally gearing up to require that all countries set up a beneficial ownership register or use an alternative mechanism with equal efficiency. The encouragement for countries to make the registers public falls short of Transparency International’s expectations but have the potential to significantly strengthen countries’ resistance to dirty money regardless.
3 December. Transparency International, along with our representatives in 35 jurisdictions, submits a response to the public consultation, suggesting additional ways to strengthen the proposed amendments to FATF's Recommendation 24 on beneficial ownership transparency and its interpretive note.
13-17 December. Following Transparency International’s advocacy, the 9th Conference of the States Parties to the United Nations Convention against Corruption (UNCAC) adopts a resolution which calls upon countries "to adopt a multipronged approach to beneficial ownership transparency through appropriate mechanisms such as registries".
Transparency International, The B Team, Global Witness, Open Ownership and Tax Justice Network urge national financial regulators attending the FATF plenary to support proposals in which Recommendation 24 mandates verified, central registers of beneficial ownership information.
You may think that authorities investigating financial crime can easily find out who's behind companies suspected of taking part in #corruption, #moneylaundering &terrorist financing, right? Sadly, you'd be wrong, but this week, govts have a chance to fix that. #FATFweek (Thread) https://t.co/EhW64jaaau — Transparency International (@anticorruption) 16 February 2020
On International Anti-Corruption Day, 9 December, we launch a petition calling on the first-ever UN General Assembly Special Session against Corruption (UNGASS), scheduled for June 2021, to commit to transparency in company ownership. First signatories include a group of leading economists, trade unions and civil society organisations tackling issues from human rights, to poverty, to business integrity.
Transparency International calls for the revision of the global standard on beneficial ownership transparency, after concluding that it is not fit-for-purpose. We make the case for a specific requirement with the potential to have the biggest impact: centralised, public registers of companies' true owners.
Transparency International found that in the vast majority of 26 countries analysed in detail, authorities rely on information collected by banks and other reporting entities. This impedes investigations, as authorities often first need to know where the company banks. They may also require a court order, and information held by banks is often unverified. Cross-border ownership and banking structures create additional hurdles.
What's 'beneficial ownership'?
A beneficial owner is the real person who ultimately owns, controls or benefits from a company or trust fund and the income it generates. Complex and opaque corporate structures make it easy for legal entities to hide their beneficial owners, especially when nominees are used in their place and part of the structure is in a secrecy jurisdiction.
- Submission: Closing the trusts loophole (December 2022)
- Submission: Ensuring effective implementation of the new global standard (December 2022)
- Submission: Paving the way for enhanced trust transparency (July 2022)
- Amicus curiae submission to the Court of Justice of the European Union (June 2022)
- Letter: Transparency International's national chapters and partners in 12 African countries write to FATF (January 2022)
- Submission: Strengthening the future global standard (December 2021)
- Submission: A new global standard on beneficial ownership transparency (August 2021)
- Report: Who is behind the wheel? Fixing the global standards on company ownership (October 2019)
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