New registry promotes transparency on ownership
UNTIL the Panama Papers story broke last month, few people realised what lengths the offshore financial markets went to in order to support the work of narco-traffickers, kleptocrats and international gangsters of all kinds. This is full service for criminal organisations.
Bad actors can evade taxes, avoid awkward questions about the source of the wealth, launder their largesse and begin the long process of what the French call “buying their second virginity”.
Setting aside concerns that the hack exposed the law-abiding as well as crimi- nals and undermined entirely the confidentiality that clients expect to enjoy with their lawyers, this was rivetting stuff.
Those exposed included Putin’s wellheeled cellist, Iceland’s now-former prime minister Sigmundur David Gunnlaugsson, plus the usual raft of Fifa executives.
But alongside this global perp-walk are at least as many individuals and companies trying to fly quietly under the radar for more defensible reasons. There are those taking advantage of legitimate tax avoidance schemes.
Secret ownership
There are also the legitimately prosperous who know that their success, were it known, would make their families the targets of kidnappers and extortionists. They will use secret companies and legal tax vehicles for as long as those are available.
At his summit in London, UK Prime Minister David Cameron called on the world to require disclosure of real owners behind each company – those who can claim the value of the company after all of the layers and pretense are peeled away.
If each country prohibits secret ownership, one by one, the last country standing will be crowded indeed as the world’s worst actors shelter within its borders. But there’s another way.
Trace, a non-profit business association that helps companies to reduce risk and improve compliance, and for which I work, launched the first global beneficial ownership registry late last month: Tracepublic.
It’s free to register and free to search. It is not limited by national borders, and unlike national registries, it is voluntary.
What does that mean? It means companies that recognise the reputational disaster arising out of secret companies can make their ownership details public.
They can continue to benefit from whatever lawful tax advantages their offshore companies afford and their total wealth remains a secret. But if they are really using these secret companies for legitimate purposes, why not own up to that?
Tracepublic isn’t a definitive solution. That would require every country to abolish secret companies. But voluntary disclosure of ownership is a significant and norm-changing step forward.
Pushing disclosure
The companies that decline to disclose tell us as much about themselves as those that use the registry. Businesses concerned about the secrecy surrounding these companies can decline to work with partners that refuse to disclose their ownership.
With the growing emphasis on transparency, many of the bad actors will isolate themselves with their reticence.
We invite those who argue that they have nothing to hide to post their ownership details. We encourage those who don’t believe them to insist that they do.