Should there be a mandatory register of beneficial ownership of corporate structures in every country?

By Judith Sargentini, MEP, Group of the Greens/European Free Alliance (30/11/2017)

Worldwide, between 1.5 and 2.8 trillion US dollars is lost annually due to money laundering. For developing countries, the consequences of illicit financial flows are even worse, aggravating the existing inequality – three times as much money is illegally leaving Africa than comes in through official development aid. These are staggering numbers. It is money that makes a difference to the viability of a society.

In a time of increasing financial insecurity at a global level, there is a need for firm action. Transparency is key in the fight against money laundering, terrorism financing, tax evasion and tax avoidance. Although countries, to a large extent recognise the importance of this principle at the international level (the G20 for instance), much still needs to be done. Investigative journalists have repeatedly communicated the pitfalls in our response. Lux-leaks, Swiss-leaks, Panama Papers and many more revelations demonstrate that complicated chains of companies and trusts allow money to be laundered – money that should be spent on tackling hunger, building schools, hospitals, roads, and educating teachers, nurses and doctors.  

The anonymity, secrecy and opaqueness that companies and trusts allow are misused by persons with bad intentions. To prevent criminals using our legal systems in such a manner, transparency for the public is required. Public scrutiny plays an essential role.

We also see the importance of making certain information public in other fields. The business registers in EU Member States are public because it is important for a potential contracting party to understand who its counterpart is. The beneficiaries of Common Agricultural Policy (CAP) payments are published because it concerns the use of EU funds. The global Extractive Industries Transparency Initiative (EITI) demands public disclosure of the beneficial owners of oil, gas and mining companies which is crucial to achieve good governance in this sector.

That is why I have advocated for increased transparency, to reveal who actually owns a company or a trust. In 2015, we concluded the 4th Anti-Money Laundering Directive. We demanded a public register of who ultimately owns a company or a trust, a so-called UBO register. Despite the initial opposition of the Council and the Commission, we did manage to get a pledge for Member States to set up a public register for companies. There was no appetite in the Council for having a strict approach on trusts. But now, there is a change of attitude. After the Panama Papers the Commission proposed a targeted revision of the directive and saw the light: public registers are necessary for both companies and trusts to stop the corrupt from hiding money. Currently, I am negotiating with the Council and the Commission where we see positive movement. The judgment of the Court of Justice, indicating that in certain circumstances trusts can be considered similar to companies, is a step forward. However, we cannot just have transparency for EU companies and trusts. We also need them for foreign entities that are incorporated outside the EU and operate on our continent. This will help prevent criminals from circumventing the rules by setting up companies and trusts in third country jurisdictions. This topic becomes more important when we face the consequences of the UK leaving the EU and have their companies and trusts conducting business in other Member States. I, therefore, call upon the Member States to be ambitious in the fight against money-laundering, terrorism financing, tax evasion and avoidance.