Beneficial ownership lists: getting to the bottom of who owns what

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International standards on public beneficial ownership lists are changing so as to favour more transparency, and the EU’s 5th AML Directive seems to be at the forefront of change. 

To be entirely precise, the way was paved by the United Kingdom setting up the first register of companies’ beneficial owners, in 2016

The EU is expected to follow suit with revisions in the now-adopted Fifth AML Directive aiming to enhance access to and transparency of beneficial ownership registers. Under EU5AMLD, these registers will be public, though the key emphasis seems to be on facilitating access for Financial Intelligence Units across the EU. We have discussed in a previous article why this can only be a good thing.

An example of the global precedent-setting that can be achieved through EU directives is the swift commitment made by the Cayman Islands government to introduce a public register of beneficial ownership: they announced earlier this year their commitment to introduce a public register of beneficial ownership of all financial entities domiciled in the Cayman Islands by 2023

Indeed, similar measures are being considered (and hopefully implemented) by US lawmakers: the US House of Representatives has voted to advance legislation that would require companies to disclose who owns them, cracking down on anonymous shell companies which pose a huge Money Laundering risk.

Why go public? 

Arguably, it isn’t necessary to have a public register since the key people interested in its data will be those who are already professionally interested, e.g., those working for Financial Intelligence Units (FIUs).

However, transparency groups like Global Witness warn that making access to the register open and free helps cater to significant demand for it as well as to help improve the quality of the data.

Additionally, with investigative journalism facing significant financial pressure in recent years, keeping public registers as open as possible benefits our society in that it gives more resources to journalists to report back to us on the financial state of the world. This is why journalists that work with financial data support such open access.

Enhancing your country’s credibility

For a country like the Cayman Islands, which has a notorious reputation as a tax and secrecy haven, being able to demonstrate compliance with international standards helps build credibility. 

Premier Alden McLaughlin was able to say

"The introduction of the UK's public beneficial ownership register, the EU 5th Anti Money Laundering Directive and similar actions by other jurisdictions represents a shift in the global standard and the practices used to combat illicit activity."

This follows also the Cayman Islands’ achieving the same OECD rating for tax transparency as countries like the UK, US, Germany, Canada and Australia. 

Far from damaging its foreign investment prospects, this move should instil confidence in investors that their money and affairs are safe there. 

The AML/CTF regime proves to us the many interconnections between dirty money and the world of crime and terrorism – and this is a recurring theme in our articles, for example when we looked at big business’s responsibility to oversee its supply chain recently

Modern and forward-looking states and companies cannot afford to ignore their increasing ability to catch crime at the crucial stage of financing, and it is our responsibility for this culture of compliance to continue to improve.

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