Money laundering and tax evasion will be harder to hide following the approval of new amendments to the EU’s proposed Fourth Anti-Money Laundering Directive by the European Parliament on Tuesday, 11 March 2014 which in future will require the ultimate owners of companies and trusts to be listed in public registers in EU countries.
The new rules have created tension between those arguing in favour of transparency in order to make life more difficult for criminals attempting to hide their illicit money, and the concern that this raises over confidentiality, privacy and even security issues for wealthy individuals. It is not clear yet if or how these concerns will be taken into account by local legislation in the EU countries.
The proposed Anti-Money Laundering Directive calls for the establishment of a public central register in all 28 EU countries. Each national register would list information about the ultimate beneficial owners of legal arrangements including companies, foundations, holdings and trusts.
Members of the public will be able to register online to consult the database, a relatively low test for gaining access to the registers, which has been criticised. Further scepticism towards the plan is that unless the laws can be enacted internationally and beyond the EU, an EU-wide register is unlikely to significantly combat the use of corporate vehicles for illicit purposes such as disguising corrupt and criminal proceeds and tax evasion.
The issue is, however, gaining momentum on the international agenda, as indicated by the Cayman Islands government who recently initiated a consultation into proposals to implement a public registry of beneficial owners. The US continues to drag its feet on the issue, but increasing pressure is being placed on legislators to follow the UK and now Europe’s lead. The US Treasury for example is planning to release a proposal that would force financial institutions to provide information to the Treasury on the ultimate beneficial owners of certain bank accounts in order to combat money laundering. But for this initiative in the US to be truly effective proponents of transparency argue there needs to be legislative change that requires the US Government to collect information on beneficial ownership and make it publicly available. US Senators Levin and Grassley lead the domestic push for transparency on owners of companies with the introduction of a new proposed law entitled Incorporation Transparency and Law Enforcement Assistance Act, S. 1465, which aims to combat transnational crime by requiring US States to include in their incorporation applications a question asking for the prospective corporation’s true owners.
It is undoubtedly the case that the momentum towards abolishing anonymous companies is gathering pace. It will be an agenda NGOs will continue to push hard on as well as certain Governments including the UK. If and when the US falls into line with the EU’s stance, it seems inevitable that the rest of the international community will eventually follow.