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Beneficial Ownership to Improve Risk Management

September 13th, 2017 - Posted by Mark Dunn in Anti-Bribery And Corruption

Beneficial ownership registries on the rise

When the International Consortium of Investigative Journalism published the Panama Papers last April, few knew where the revelations of tax evasion through off-shore accounts and shell companies would lead. More than a year later, the fall-out continues. The latest casualty? The political career of Nawaz Sharif, who was unanimously ousted from his position as Pakistan's Prime Minister by the country's Supreme Court. Calling it "the most serious political ramification yet of the Panama Papers leak," the Guardian noted that the papers linked Sharif's children to the purchase of London property through offshore companies in the British Virgin Islands when the children were still minors. Sharif, however, is not alone. Dozens of senior government officials found themselves in the spotlight after the Panama Papers were released, including the Icelandic prime minister, Sigmundur Davio Gunnlaugsson, who was forced out of government the same month the Papers were released when it was alleged that both he and his wife had bonds for collapsed Icelandic banks through an offshore company. As the struggle to bring more transparency to beneficial ownership and fight corruption continues, companies face increased compliance risk.

Lack of centralised beneficial ownership registry complicates compliance efforts

It's not surprising that the ramifications of the Panama Papers are still being revealed. With 1.5 million documents covering more than 200,000 offshore entities, the process of sifting through the details—and then investigating them—is a slow process. What hasn't been slow, however, are efforts to create laws that bring greater transparency to the complex legal structures and corporate vehicles that can be used to obscure beneficial ownership. Certainly, beneficial ownership does have legitimate uses: a company might, for example, use beneficial ownership to distance itself from a new venture until its proven successful, or a high-profile entertainer or politician might use beneficial ownership to keep a residence out of public records due to privacy or security concerns. But all too frequently, as the Panama Papers revealed, beneficial ownership can just as easily hide corrupt and illegal practices, including tax avoidance, money laundering, terrorism financing, or arms trafficking.

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In addition to laws already in play in the EU, UK and U.S., which we've detailed in our eBook, "The Hidden World of Beneficial Ownership," this summer has seen several known tax haven territories implement their own beneficial ownership transparency programmes.

  • The British Virgin Islands enacted legislation to implement a database of beneficial ownership—Beneficial Ownership Secure Search (BOSS) System—in order to comply with an agreement it entered with the UK in April 2016.
  • The Guernsey Ownership of Legal Persons Law, 2017 received Royal Assent in late July and came into force in mid-August.
  • The Cayman Islands beneficial ownership regime came into force on July 1, 2017, establishing a non-public centralised registry for registerable companies and individuals.

Addressing Risk Management

The global regulatory landscape is certainly evolving as a result of the Panama Papers. Sites like OwnershipTransparency.com and OpenOwnership.org represent collaborative efforts— between NGOs, countries and corporations—to address the issue of beneficial ownership.

Nations around the world are working to address the need for transparency of company ownership and control. Companies face more pressure than ever to address compliance risk. Without a comprehensive, global beneficial ownership registry, however, the quality and depth of the due diligence you conduct is more important than ever. Do you have the right tools and processes in place to mitigate compliance risk when it comes to addressing beneficial ownership?

3 ways to apply this information now:

1. Learn how LexisNexis can help. Arrange a your organisation address the issue of beneficial ownership. Contact us to arrange a free demo of our Diligence solution.

2. Read more about the state of beneficial ownership transparency efforts in our updated e-Book, "The Hidden World of Beneficial Ownership."

3. Share this blog on LinkedIn to keep the dialogue going with your colleagues and contacts.

What do you think?