The OpenLux investigations published today by Le Monde and other media organisations illustrate major weaknesses in anti-money laundering frameworks in Luxembourg and the EU, Transparency International said today.
Our additional analysis of OpenLux documents in collaboration with the Anti-Corruption Data Collective (ACDC), shows that investment funds in Luxembourg largely operate in secrecy, creating opportunities for criminals and the corrupt to hide assets, avoid taxes and launder the proceeds of crime.
OpenLux is an international investigation initiated by Le Monde, in collaboration with the Organized Crime and Corruption Reporting Project, Miami Herald and Süddeutsche Zeitung, among others. Investigative journalists obtained around 3 million documents and records from Luxembourg’s online business register platforms. These include corporate documents, financial statements and beneficial ownership declarations from more than 260,000 companies, covering a period from 1955 to December 2020.
After analysing OpenLux data, Transparency International and ACDC have discovered that approximately 80 per cent of private investment funds in Luxembourg did not declare who benefits from them. When data from the Luxembourg registry is compared with reports that some funds submitted to the US government, analysis shows that over 15 per cent submitted conflicting information to the US and Luxembourg authorities about their beneficial owners. This means that a significant number of Luxembourg-based funds appear to have failed to identify their owners as required by law.
Maíra Martini, Research and Policy Expert at Transparency International, said:
"The person who benefits from an investment fund is the person whose assets are under that fund’s management. It does not make sense for the definition of a beneficial owner to only include certain shareholders or the person making investment decisions. The EU and Luxembourg authorities need to close this loophole, which allows politically exposed persons to hide their assets and potentially launder illicit funds."
David Szakonyi, co-founder of the Anti-Corruption Data Collective, said: “Beneficial ownership registries are a powerful tool for fighting corruption and money laundering. But they only work as intended when the data contained is complete and accurate. Not only should all natural persons publicly disclose their ownership stakes in companies, funds, and trusts, but verification mechanisms need to be put in place to ensure the integrity of this reporting.”
Transparency International calls on Luxembourg and the European Commission to review and amend the current definition of beneficial ownership. Investment funds must be required to disclose all individual end-investors who financially benefit from the fund.
Luxembourg is home to more than 15,000 investment funds that hold more than 4.5 trillion Euros in assets. According to estimates, 67 per cent of cross-border funds worldwide are domiciled in Luxembourg.
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