Beneficial ownership registries move to center of global attention as work on implementation heats up

Beneficial ownership policy and practice will come into sharper focus this spring and summer as multinational bodies discuss global standards and as the US and Canada iron out rules for their upcoming beneficial ownership registries. Their decisions will shape the way businesses disclose information to authorities.

Last week, speakers at the United Nations General Assembly's special session against corruption stressed that beneficial ownership registries, which name individuals who own companies, deprive money launderers of secret corporate havens to hide their funds. All UN members committed to establishing registries in their countries.

The Group of Seven countries endorsed the UN declaration and Saturday called for universal adoption of beneficial owner registries.

"We further note the benefits of making beneficial ownership information publicly available where possible," said in a communique. "We call on all countries to fully implement the Financial Action Task Force (FATF) Standards and strengthen them."

FATF is working to hone its existing recommendation that countries incorporate beneficial ownership registries into their anti-money laundering programs.

These high-level commitments and reviews demonstrate heightened political will to deploy beneficial ownership registries.

But individual countries are able to adopt their own specific rules governing the use of the registries. The international discussions will help determine whether the registries across the globe will be harmonized, or if businesses, banks and investigators will face a patchwork of rules.

UN commitments

The UN last week adopted a declaration that, among other things, committed UN members to make beneficial ownership information available to "competent authorities."

"To this end, we will develop and implement the measures necessary to collect and share such information on the beneficial ownership of companies, legal structures or other complex legal mechanisms, and enhance the ability of competent authorities in this regard," the declaration said.

About 100 countries have set them up already, with more making plans to do so.

National representatives touted their countries' beneficial ownership registries. Romania, for example, said only firms listed in the country's ownership registry will be allowed to bid on public contracts.

One top UN official said registries should be taken one step further.

"The establishment of a global beneficial ownership registry will help identify the perpetrators of corruption," said Munir Akram, president of the UN Economic and Social Council.

Global standards

While there is no proposal for a single global database of beneficial ownership, there's a push for global standards.

FATF, for instance, is reviewing its global standards, with a consultation on proposed changes set to take place this month.

Beneficial ownership information shared across various countries “is a key part of that fight to stop money laundering,” David Lewis, the executive secretary of the FATF, said last month.

However, many countries assessed by FATF aren't going far enough to combat dirty money with beneficial ownership registers. “It isn’t good enough,” Lewis warned.

“If information is effectively collected, then there are clear advantages to putting it into a registry. It makes it easier to find, to check and to verify,” he said.

EU legislation due next month

The European Commission has endorsed the FATF’s global mandate in implementing beneficial ownership registers across the bloc. A new EU legislative package to tighten the rules that govern the registers is due July 6, said senior commission official Martin Merlin.

“Until now, the application of anti-money laundering rules has suffered from a lack of sufficient detail at Union level […] leading to insufficient cooperation and information exchange, particularly in cross-border situations,” Merlin said.

When the commission announced plans last year for an EU-wide anti-money laundering regulator, it set in motion upgrades to beneficial ownership registries.

The commission urged member countries to bolster the transparency of beneficial ownership registers to “ensure that they are populated with high-quality data,” the commission said.

The commission also noted the importance of sharing information, saying "work on interconnecting the beneficial ownership registers has already started and the interconnection will be operational in 2021."

US, Canada and the question of public access

Two G7 members, the US and Canada, recently started the process of establishing beneficial ownership registries.

On Jan. 1, the US Congress passed the Corporate Transparency Act, which requires small US corporations and limited liability companies to register their beneficial owners.

The lack of a US beneficial ownership registry has been considered a gap in the US money laundering program, with FATF last year calling out the US for being non-compliant with the international body's recommendation to maintain a registry.

The Financial Crimes Enforcement Network has collected one round of public comments about possible regulations and is expected to publish regulations for further comment this summer. The law requires that FinCEN finalize the rules by Jan. 1, 2022.

The US registry will be open only to law enforcement officials investigating specific crimes and to banks conducting due diligence to comply with know-your-customer rules.

Restricted-access registries have been criticized by advocacy groups such as Transparency International and the Financial Accountability & Corporate Transparency Coalition, who say it will diminish its effectiveness. The UK public registry has worked well, they say, and letting the public examine the data will help ferret out money laundering.

FATF's Lewis also supports public disclosure. Publicly accessible registries “increase the success of corruption investigations that otherwise rely on mutual legal assistance requests to get this information, taking years and often failing,” he said.

Canada will establish a public beneficial ownership registry by 2025. In its federal budget released in April, it allocated C$2.1 million ($1.74 million) for the registry.

Two provinces are planning to move ahead sooner with some or all ownership information, Sasha Caldera of Publish What You Pay Canada said last week. Quebec already provides some corporate information through a public Website and will add ownership information as a public offering.

British Columbia in November established its Land Ownership Transparency Register that publishes the names of "individuals who are deemed to have an indirect interest in land." The province said money laundering has raised real estate prices, harming housing affordability.

The difference between the US and Canadian approach to public access illustrates the most controversial issue surrounding beneficial ownership registries. But other elements, ranging from mundane data format protocols to legal procedures for sharing and protecting the information, remain to be worked out by international bodies and individual countries.

Until the issues are worked out, criminals and corrupt officials will retain the luxury of stuffing their lucre in anonymous shell companies, illegally protected from the eyes of authorities and the rightful owners of the money.