Thursday

17th Jan 2019

MEPs vote to abolish secret company ownership

  • City of London: The commission estimates the EU economy loses at least €120 billion every year, most of through money laundering (Photo: avail)

A European Parliament vote on Thursday (20 February) to set up public registers to identify company owners has been hailed as ground-breaking by pro-transparency groups.

MEPs in the civil liberties and economic committees backed the European Commission’s anti-money laundering directive but then added a public register provision to help crack open shell companies and trusts.

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“We are enlarging the whole anti-money laundering directive from crime fighting to tax evasion and I think that is very important,” Dutch Green MEP Judith Sargentini, one of the parliament’s lead negotiators on the file, told this website.

Often based offshore in places like Bermuda, Jersey, and Gibraltar, shell companies are legal entities set up to hide an owner’s identity.

The World Bank estimates 70 percent of the proceeds of crime, corruption, and tax evasion are laundered through the murky corporate structures.

Around 1 percent of the criminal proceeds are detected.

The seizure rate by police is even lower, according to the UN Office on Drugs and Crime, with EU governments and developing countries losing out in billions of tax revenues every year.

To scale back the losses, MEPs want each member state to list the ultimate owners of companies and trusts in publicly accessible online business registers. The registers would be interconnected.

MEPs from across the political divide support the plan.

“We got all political parties from GUE to EPP and ECR voting for public registers on ultimate beneficial owners,” said Sargentini, referring to leftist, centre-right and rightist groups in the parliament.

Banks and financial institutions, auditors, lawyers, accountants, notaries, tax advisors, asset managers, trusts and real estate agents would have to provide the names to national authorities to put in the registers.

“They need to verify the identity and sometimes that means piercing various layers,” says Nienke Palstra, a policy expert on anti-money laundering at Transparency International.

Current methods to disclose the details can be costly and time intensive.

Organisations are currently required to file a report, whenever they encounter something suspect, to a national authorities’ financial intelligence unit (FIU).

Insiders say the units do not always follow up on the reports or co-operate well with other units in different member states.

“There are some serious doubts whether or not the current system - with those FIUs which have to follow up on all the suspected activities - is efficient,” says Koen Roovers at the Brussels-based Financial Transparency Coalition.

But with interlinked registers in each member state, organisations over time would have a better starting point to verify the beneficial ownership of potential clients.

It also makes it easier for an FIU in one member state to access the data in another.

The public nature of the registers is meant as an extra layer of scrutiny to ensure the data is up to date and correct.

Changes in ownership would have to be communicated to the national authorities within 30 days. People who provide inaccurate or false information could face criminal sanctions.

The draft bill is set for a vote in the plenary in March. MEPs are hoping to launch inter-institutional negotiations in autumn.

Both the UK and France support the registers. But resistance has emerged from Germany.

“I hope Germany with the new CDU-SPD government might change its tune and come aboard with the Brits and the French,” noted Sargentini.

EU to donate criminal assets to charity

Criminal suspects who flee the country or who are ill could still have their illicit assets confiscated and donated to charity, under new rules endorsed by MEPs.

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