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Revealing true corporate owners is key to fighting “dirty money”

Identificar a los verdaderos dueños de las empresas es clave en la lucha contra el “dinero sucio”

Eddie Rich |

Money laundering and corruption keeps making headlines. Danske Bank, Denmark’s largest lender, is reeling from a EUR 200 billion money-laundering scandal that erupted in September, the same month Dutch bank ING was hit with a EUR 775 million fine for similar misdeeds.

The Panama Papers in 2016 and the Paradise Papers in 2017 not only revealed the schemes that exist for many people to avoid tax, dodge sanctions, recycle and invest the proceeds of corruption, and conceal potential conflicts of interest, but the sheer size of the problem. Tax avoiders are systematically gaming the system. Ordinary citizens are losing out.

A key weapon in the fight against the misuse of corporate vehicles for tax evasion and money laundering is to reveal the identity of who ultimately stands to benefit from a company’s proceeds. In the case of resource-rich countries, this can mean billions of dollars in extractive revenue payments being channeled back to the citizens.

Part of the famous ‘resource curse’ is related to how countries rich in non-renewable natural resources are more susceptible to have higher corruption levels than similar countries with fewer resources. In 2016, the EITI agreed to adopt new rules on disclosing beneficial ownership for all extractive companies operating in its implementing countries. By 2020, companies that apply for, or hold a participating interest in, an exploration or production of an oil, gas and mining license or contract in an EITI country must report the name, nationality, and country of residence of the beneficial owner, as well as identify any politically-exposed persons among its owners.

We’re actively assisting our implementing countries to disclose the beneficial owners in the sector. This involves pilots, feasibility studies, workshops, legal and technical assistance efforts, and conferences, such as next week’s Africa EITI beneficial ownership transparency conference that will gather over 200 government, private sector and civil society representatives from over 25 African countries in Dakar, Senegal, to share best practices. The EITI has also supported several countries to carry out legislative reviews and establish public registers of corporate ownership. EITI stakeholders have been central to discussions surrounding new laws and regulations and have helped to coordinate and shepherd legislation through, most recently in Ukraine with the Law 6229 ‘On ensuring transparency in extractive industries’ that was passed by Parliament on 18 September 2018.

More than 50 EITI countries have published their plans for how to disclose the real owners of companies in their extractive sector. The national roadmaps include building institutional and legal frameworks, putting in place reporting processes and creating registers to host beneficial ownership data. However, implementing countries will need substantial advice and political support to turn these commitments into reality.

This week, government, company, civil society and multilateral organisation representatives from around the world will gather at the 18th International Anti-Corruption Conference in Copenhagen – the home of Danske Bank. Governments and companies alike will be invited to restate their commitments on beneficial ownership transparency, cross-border collaboration as well as supporting countries with expertise and to establish public registers.

If we are going to tackle corruption, beneficial ownership transparency is a necessary step. Over 20 resource-rich countries have committed to establish beneficial ownership registers through the EITI, as well as other platforms like the Open Government Partnership, the 2016 London Anti-Corruption Summit and the EU Anti-Money Laundering Directive. By focusing on specific actions to support commitments, this week’s conference is a key opportunity to ensure that we don’t just win the argument, we also win the follow-through.

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