2016: A year for open government

May 9th, 2016

2016 is a big year for the open government movement, and recent revelations from the leaked Panama Papers will only serve to forward the transparency discussion further. As we’ve seen from the worldwide coverage, things like hidden company ownership and strict secrecy have fueled questionable links between world leaders and offshore jurisdictions.

Luckily, from the Anti-Corruption Summit in the UK this week to the Open Government Partnership meeting in France in December, this  year is sure to be full of events highlighting open government and transparency.

But for real change national legislators need to get to work.

One of the first moves countries could take is the introduction of a ‘Beneficial Ownership’ (BO) register. For countries participating in the OGP, especially those who are renewing their National Action Plans, the work on public BO register is particularly pertinent. The rest of this blog details the lessons learned in the EU where legislative work to create BO registers is already ongoing.

With the implementation of the latest Anti-Money Laundering Directive (AMLD IV), EU member states have an opportunity to make a giant leap to enhance transparency in company ownership. The AMLD IV lays out the minimum requirements for national-level registers that will be implemented, but it’s up to the member states to design the registers in a way that’s functional and effective. To us, there are three elements worth mentioning here:

The BO registers were brought into the AMLD revision at the wish of the European Parliament, but until the last round of negotiations the Parliament, Council and Commission differed on the scope and shape of the registers, and as a result the text has some peculiar wording. The most notorious may be the requirement of a so called ‘legitimate interest’ for accessing these public registers. It is still unclear what this term actually means, and the member states transposing the Directive have acted accordingly.

The first BO register goes online on June 30 in the UK in a public, open data format with no ‘legitimate interest’ test to gain access. The Netherlands also announced that they will introduce a public BO register, after concluding that a ‘legitimate interest’ would be difficult to verify and enforce, being unnecessarily burdensome process for both the administrator of the register and its users. These two cases show the benefits of not including the ‘legitimate interest’ requirement, while embodying the ideals of open government. Unhindered access to registers is the key to both increased transparency for citizens and decreased costs for governments.

But for the ownership registers to serve their intended purpose, more is needed.

Mere access to information does not constitute open data: it is also essential to have the ability to share and reuse that information. Other member states need to follow the UK example and make the BO registers publicly available in an open data format, so that they can be researched in depth and compared with other datasets. This would not only make the work of investigators of money laundering and terrorism finance more effective, it would also provide journalists, academics and civil society organisations with an important tool to monitor corruption and tax abuse more effectively. And the list of positives goes on: European businesses vetting process of potential business partners across the continent would be facilitated, as well as cooperation between European public authorities. The latter point is even more important when considering the European Commission’s longer term goal of interconnecting the European business and BO registers before the end of this decade.

Protection of individual privacy is important, but sometimes these benevolent protection efforts are abused to conceal criminal activities. As the AMLD IV suggests that only part of the information gathered by the public authorities is to be made public, exemptions from the public sphere should be granted only in exceptional cases that are individually deliberated and regularly reviewed.

Many politicians and celebrities whose name popped up in the Panama Papers quickly stated that they have done nothing illegal or gained in any way economically through the anonymous offshore companies they had had set up. Why, then, use the services provided by the likes of Mossack Fonseca? As Mo Ibrahim has said, “There’s absolutely no good reason for someone to have an anonymous company”. Now is the moment when governments in and outside of the EU need to take significant steps in abolishing anonymous companies.

Written by Koen Roovers and Henri Makkonen

Koen is the FTC's Lead EU Advocate. Henri is the FTC EU Intern.

Follow @FinTrCo