As business prepares to meet multiple new national beneficial ownership transparency requirements, stakeholders must collaborate on solutions that deliver timely, tangible and economically efficient benefits.
It is widely recognised that beneficial ownership transparency is a key enabler in the fight against corruption and other forms of economic crime. The illegal diversion of funds, coupled with efforts to by-pass tax systems, undermine scope to achieve sustainable development goals and foster a level playing field for businesses. The Panama Papers revelations, which wiped $135 billion off the stock value of some 400 public companies, remind us of the scale of underlying issues.
Over 40 countries, including the G20 countries, have committed to enhancing beneficial ownership transparency. The EU's 4th Anti-Money Laundering Directive is due to be implemented by Member States by June 2017, to ensure consistency of EU rules with global standards laid down in international recommendations (as part of a broader strategy to tackle financial crime). The EU sets requirements for information on ultimate beneficial ownership of profit-making legal bodies to be made publicly available in an Ultimate Beneficial Owner (UBO) Register. Member States' registers are to be in place by June 2018 and able to interconnect. Member States' preparatory steps are advancing and vary depending on prior rules in place. Several governments in other jurisdictions world-wide have likewise been working on similar projects.
At this juncture businesses must closely monitor relevant local developments and prepare to take steps to meet new requirements, such as for the set-up of a UBO Register for their markets in the EU. They are keen to understand likely costs associated with their obligations, and to clarify what practical insights can be derived from increased disclosure. Legitimate concerns by some parties about the downsides of transparency requirements still need to be addressed.
The business benefits of transparency are accepted: to manage legal and reputational risk, knowing who ultimately owns, controls or benefits from a company or trust fund and the income it generates, has value. However significant resource commitments may be needed to gather, submit and maintain accurate beneficial ownership information, especially where businesses must request the same from third party suppliers and other partners. If, in addition, there are charges for data access or data processing and reconciliation are complex, the burden on businesses will remain high. In a data-driven world, care should be taken not to unreasonably raise the costs of compliance: solutions and incentives must genuinely support a better business environment and a better society.
In practice, being able to reduce complexity requires complete, accurate, timely and readily searchable datasets spanning relevant geographies, in particular where risks associated with doing business are considered higher. Consistency is an asset, particularly for businesses dealing cross-border. For all parties, such complex projects take time and involve a significant element of 'learning by doing': ongoing focus on optimal design and implementation remain critical both at national and international levels. B20 has called for a global approach to beneficial ownership transparency, led by G20, since 2014; this is reflected again in the latest Policy Paper on RBC&AC. Forward-thinking governments, businesses and civil society representatives can work together to fine-tune beneficial ownership transparency requirements so as to tangibly improve the ease of doing business with integrity.