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Significant beneficial ownership measures announced at London Summit

May 17th, 2016 - Posted by Sam Hemmant in Anti-Bribery And Corruption, Anti-Money Laundering

Public registers of beneficial ownership are to be set up in the UK, France, Nigeria, Afghanistan and the Netherlands, UK Prime Minister David Cameron made the announcement at last week's Anti-Corruption Summit in London.

The first ever international Anti-Corruption Summit was attended by world leaders including the presidents of Afghanistan, Nigeria, Colombia, Ghana and Sri Lanka, and aimed to develop a global strategy for fighting corruption and financial crime.

Action on beneficial ownership

Unsurprisingly given the recent leak of the Panama papers, the most significant measures announced at the Summit aim to make the ultimate beneficial ownership of companies more transparent.

The Prime Minister announced at the Summit that foreign companies owning property in the UK will now have to publicly disclose their ultimate beneficial owner. The move is intended to stop companies from laundering or hiding ill-gotten money by acquiring property in the UK. Foreign companies currently own around 100,000 properties in the UK, more than 44,000 of which are in London.

From June this year, any foreign company that wants to buy property in the UK or bid for government contracts will be required to join a new public register of beneficial ownership information. The Prime Minister called this "the first register of its kind anywhere in the world".

Mr Cameron said France, Nigeria, Afghanistan and the Netherlands have agreed to launch their own public registers of beneficial ownership, and New Zealand, Australia, Jordan, Indonesia, Ireland and Georgia are exploring the idea.

Sharing information on beneficial ownership

At the summit it was also announced that 40 jurisdictions have committed to automatically sharing beneficial ownership information with each other. This means law enforcement agencies in these countries will be able to see who really owns and controls every company incorporated in these jurisdictions.

The Guardian recently criticised Britain's overseas territories and crown dependencies for their failure to join the UK in requiring companies to share this information. But some overseas territories and crown dependencies have signed up to do this.

Many charities and non-governmental organisations will be disappointed that more have not committed to automatically sharing beneficial ownership information. Oxfam, Action Aid and Christian Aid turned Trafalgar Square into a 'mock tax haven' yesterday to protest against the practice of setting up companies in offshore jurisdictions.

But the fact that some territories and dependencies have made this commitment to transparency on beneficial ownership will put pressure on others to follow their lead.

Patrick Moulette, who heads the Anti-Corruption Division at the OECD, said the announcements on beneficial ownership are "a significant step in the right direction". "Beneficial ownership is a key issue affecting various areas like corruption, disguising the proceeds from corruption, tax fraud, tax evasion, accounting fraud, money laundering, terrorist financing and other criminal activities," he said. "More information on beneficial ownership needs not only to be made available, but to be exchanged and shared between countries."

Encouragement for cross-border collaboration

Another concrete result from the Summit is that the UK will host a new International Anti-Corruption Coordination Centre in London to strengthen cross-border investigations.

The Centre, due to open in April next year, will work with enforcement agencies in the US, Canada, Australia, New Zealand and Switzerland. Interpol has also pledged its support for the coordination centre and offered its expertise to design and implement the proposal.

LINK TO INTERPOL STATEMENT: http://www.interpol.int/News-and-media/News/2016/N2016-060

The Centre will provide co-ordination and support for enforcement agencies in these countries to investigate and punish those who are guilty of corruption, and recover stolen assets.

However, it remains to be seen how this Centre will operate in practice. Professor Dan Hough, director of Sussex University's Centre for the Study of Corruption, said it "sounds encouraging, but it is not clear how it will work other than 'work[ing] closely with relevant international and national organisations'".

It was also announced that a new Global Forum for Asset Recovery will bring together governments, business and other organisations to discuss returning assets to Nigeria, Ukraine, Sri Lanka and Tunisia. A meeting will be hosted by the US and UK next year, with support from the UN and the World Bank.

Whistleblower support

In the communiqué issued by the Prime Minister at the summit, a commitment was made to "protect 'whistleblowers' from discriminatory and retaliatory actions".

Support was also offered for the role that the media can play "in complementing and reinforcing corruption reporting systems including effective monitoring and follow up". This could refer to the release of the Panama files by the International Consortium of Investigative Journalists.

The communiqué also highlighted construction, customs and extractive industries as areas that are "particularly vulnerable to corruption risks".

The full document can be read here:  https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/522791/FINAL_-_AC_Summit_Communique_-_May_2016.pdf

Need for more international commitment

Representatives from more than 40 countries attended today's Summit and there was widespread agreement on the importance of tackling corruption.

But despite all the tough talk, Professor Hough said the summit "reveals a disappointing lack of agreement on how precisely to move the agenda forward".

Transparency International said the commitments on public registers of beneficial ownership by a number of countries are "major gains". But it expressed disappointment that "key countries are missing, including major economies such as the US".

So it remains to be seen whether the Summit's aim of creating a truly global response to tackle corruption can be achieved.

Corruption on the agenda

Yet the huge interest in the Summit shows that corruption is now firmly on the agenda of the world's media and, increasingly, their governments. The London summit made front page news, in part because David Cameron was overheard on Tuesday describing Nigeria and Afghanistan as "fantastically corrupt".

For the countries and territories that attended the Summit and signed up to its proposals, yesterday represents a step forward in the fight against corruption. It will now be harder for foreign companies buying property in the UK, and for companies seeking to conceal their ultimate beneficial ownership in the aforementioned 40 territories, to escape the attentions of the regulators.

For those countries that did not attend the Summit or join the public beneficial ownership register, they will face growing pressure to require companies to share information about their ultimate beneficial ownership. With journalists currently scouring the second tranche of the Panama papers that were released on Monday, we should expect this pressure to continue to grow in the coming months.Related blogs

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