Financial Transparency Coalition

PRESS RELEASE

Amid ongoing Panama Papers fallout, Commission recommends that company beneficial ownership registers be available to general public

As most vocal opponent of increased transparency of trusts votes to leave EU, Commission clamps down on hidden ownership of trusts, but stops short of what’s needed

BRUSSELS—Today, the European Commission took a much needed step to improve financial transparency by proposing to make company ownership registers fully available to the public. The proposed changes target the Anti-Money Laundering Directive (AMLD), broader legislation last reviewed in 2015. This review of the AMLD comes just three months after the Panama Papers scandal, which exposed how anonymous companies and trusts are central to hiding wealth from tax authorities and financing criminal activities.

“We are excited that the Commission is finally committed to fully public registers for companies,” said Koen Roovers of the Financial Transparency Coalition. “The previous wording included a ‘legitimate interest’ clause, which opened the door to arbitrary refusal of information requests from concerned citizens and investigative journalists.”

But the proposal seems to follow two different tracks: while the registers for companies are made public, the ‘legitimate interest’ clause is reintroduced for trusts that are deemed ‘family trusts’. However, the Panama Papers revealed how family trusts can be problematic in terms of tax abuse, as well.

“We believe that both company and trust beneficial ownership registers should be open to the public, as this transparency is vital to ending anonymous ownership structures in the EU,” said Henri Makkonen of the FTC. “Legitimate interest tests with trust registers have all the same problems that we have seen with company registers, so if the Commission decided to scrap the legitimate interest test for one, why would they reintroduce it for the other?”

In addition to the European Commission publishing its legislative proposal, it also came up with a list of countries with a ‘high-risk’ of money laundering, in line with the Financial Action Task Force (FATF), an international standard setter in this field.

“The list includes several highly distressed countries – like Syria, Iraq and Afghanistan – but none of the big players visible in the Panama Papers. Instead of focusing on this set of countries, the EU would do better in tackling the global problem by setting a robust system for ownership transparency on their own turf,” added Makkonen.

To achieve this, the EU needs to close loopholes apparent in the proposed revision. The Commission uses a definition of “beneficial owner” that still opens the door to hiding the real owner of a company by using a nominee director, a favorite tool of money launderers, criminals, and tax evaders, as showcased in the Panama Papers.

Public beneficial ownership registers will also help curtail illicit financial flows out of developing countries, as anonymous company structures are often at the heart of multinational tax abuse, grand corruption, and criminal activity.

Notes to editors:

1. Prior to the proposed changes, the national-level registers of beneficial ownership information to be created were to be open to government authorities, but other reviewers in most cases would have had to pass a “legitimate interest” test.
2. The 4th Anti-Money Laundering Directive is still in the process of being implemented, with a deadline in June 2017, although both the EU Commission and some Member States have urged for implementation before the end of 2016.
3. Changes to access to beneficial ownership of companies can be found on page 40 of the Commission document.

Contacts:

Brussels

Koen Roovers: +32.4.9750.9871, kroovers@financialtransparency.org
Henri Makkonen: +358407750267, hmakkonen@financialtransparency.org

Washington DC

Christian Freymeyer: +1.410.490.6850, cfreymeyer@financialtransparency.org