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Nowhere To Hide? The International Push For Corporate Transparency

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Beneficial_Ownership.jpgUntil recently, the United Kingdom was ploughing a lonely furrow as the only country to have followed through on a commitment by the G8 to increase transparency surrounding the ownership and control of corporate entities, with firms preparing for the imminent introduction of its “persons with significant interest” rules.

However, since the leak of the Panama Papers in early April 2016, several governments are now clamouring to get their hands on beneficial ownership information.

Europe

Under the recently approved Fourth Anti-Money Laundering Directive, EU member states will be required to maintain central registries of beneficial ownership information by mid-2017. However, following the Panama Papers exposé, some nations are calling for much more corporate transparency and comprehensive reporting rules. Germany for example has suggested the creation of an international network of inter-linked beneficial ownership registries.

While Germany’s idea would seem impractical at a global level, it is unsurprising to find EU member states already cooperating closely on this issue. On 14 April 2016, five member states – France, Germany, Italy, Spain, and the UK – agreed to exchange data held on beneficial ownership registers and registers of trusts.

Related: EU Takes Forward Plans For Beneficial Ownership Registries

Within a fortnight of that agreement, more than 20 jurisdictions had signed up to the pilot project, including several more EU member states and a number of British offshore territories.

Indeed, the UK has maintained its lead in this area with the announcement on 12 May 2016, that foreign companies that own or wish to purchase property in the country will be required to publicly disclose who owns them.

Related: UK To Expose Beneficial Owners

United States

But where has the United States been in all this? Until recently, the Federal Government was largely silent on the subject of beneficial ownership, because company formation laws are principally a state matter.

However, things seem to be changing stateside. On 6 April 2016, Jennifer Fowler, a senior official at the US Treasury Department, told an anti-money laundering conference that the Government must "ensure that companies know and disclose their ultimate, or beneficial, owners,” and revealed that the Treasury would soon be proposing new rules in this regard.

These duly appeared on 5 May 2016, when the Treasury announced a customer due diligence final rule for financial institutions, in addition to proposed beneficial ownership legislation, and proposed regulations related to foreign-owned, single-member limited liability companies, in an effort to target tax evasion, money laundering, and other illicit financial activities.

The Treasury has urged Congress to act upon its legislative proposals and pass a new law requiring companies formed within the US to file beneficial ownership information with the Department.

Related: Report Of Foreign Bank & Financial Accounts (FBAR) Requirements

However, while the proposals are likely to find some support, especially in Democrat circles, the chances of a fractious, partisan Congress passing such legislation in an election year look remote at best.

Nevertheless, we are likely to see these ideas being advanced in other countries in the months ahead, especially as more revelations from the Panama Papers leaks ratchet up public pressure on governments to tackle tax avoidance and financial crime.

Anti Money Laundering Obligations - Webinar

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