On 20 February, the EU’s Economic Affairs and the Justice and Home Affairs committees voted to amend the proposed Fourth EU Anti-Money Laundering Directive (“the AMLD”) to require the ultimate owners of companies, foundations and trusts be listed in public registers in EU countries. This represents a significant victory for the UK’s championing of this agenda item during its recent G8 presidency.
Economic and Monetary Affairs Committee rapporteur Krišjānis Kariņš explained that: “For years, criminals in Europe have used the anonymity of offshore companies and accounts to hide their financial dealings. Creating an EU-wide register of beneficial ownership will help to lift the veil of secrecy from offshore accounts and greatly aid the fight against money laundering and blatant tax evasion".
Following the public consultation last year by the UK Department of Industry, the UK Government announced in October 2013 that it would create a public register of beneficial ownership of companies. This leadership has clearly prompted Europe to follow suit and, in fact, go further. The MEP vote was interesting because it not only endorsed the UK’s approach but extended it to apply to trusts, an area where the UK had indicated a willingness to create transparency but had not shown 100% commitment. Civil Liberties rapporteur commented that: "If we had decided to leave trusts, for example, out of the scope of this new legislation, then it would immediately have made them a perfect vehicle for criminals wishing to avoid taxation or launder their illegal money into the financial system".
The proposed new amendments to the AMLD will make registers "publicly available following prior identification of the person wishing to access the information through basic online registration". However, there would be certain provisions included to protect data privacy and to ensure that only the minimum information necessary is put in the public register. For example, registers would show who is behind a given trust, but would not reveal details of what is in it or what it is for.
The Committees’ proposed amendments are not yet final and are to be put to a vote by Parliament as a whole in March 2014. The new EU Parliament to be elected in May will begin negotiating the legislation with the European Commission and the Council of Ministers, which will be chaired by Italy, in the second half of this year.
This new step towards transparency will potentially enhance law enforcement’s and civil society’s ability to investigate money laundering, corruption, terrorist financing and tax evasion which has historically excelled through the misuse of corporate vehicles and trusts. However, preventing illicit flows requires a global effort, and the EU’s giant stride towards a public registry now shines the spotlight firmly on the US, which has been dragging its feet on this issue, as well as other countries. Furthermore, as public registries take effect, criminals and the corrupt will look for other ways to safely move their criminal assets, and greater thought needs to be given now to anticipate and tackle loopholes, revised money laundering schemes, more innovative use of vehicles to hide illicit assets and identities or simply how to discourage lying about the information contained in the public register.