Campaigns and Policy: Public Registries and Beneficial Owners

October 31st, 2013

Nuance can be a challenge for Financial Transparency Coalition issues. To the average citizen or politician, the relationship between banking laws in developed countries and poverty in developing countries is not self-evident. On its face, it’s not obvious that public registries in the United Kingdom have anything to do with corruption in the Democratic Republic of the Congo. Yet there are compelling connections between these issues and strong causal relationships between them. Our challenge is to explain why.

At the risk of sounding too self-congratulatory, I must say the group of organizations who work on these issues does a phenomenal job of explaining these connections in ways that both citizens and politicians can understand. This week this fact is evidenced by two very different, but connected, developments. The first is a brilliant public outreach campaign by the ONE campaign called Stash the Cash. The second is a promising development toward public registries of beneficial owners in the United Kingdom, which, if you read this blog, you’ve already heard about.

First, in the spirit of connecting the dots, let me say a bit about beneficial ownership, public registries, and their connection to economic development and corruption. Criminals and corrupt business and politicians use anonymous shell companies (or “phantom firms”) to avoid taxes, launder the proceeds of crime, and steal public money. Via these phantom firms, dirty money flows from the developing world to banks and trusts in developed countries. Which means developed countries have the power to curtail it. Yet the inadequacy of anti-money laundering standards and laws on beneficial ownership in many developed countries and secrecy jurisdictions allows these flows of cash to continue. 

One proposed solution to this problem is the idea of public registries. Countries would require companies, trusts, and foundations, to not only gather information about their beneficial owners, but also to publish it in the public domain. The information would be free, widely available (perhaps using existing corporate registries), and in open data format. Citizens, journalists, and members of civil society would be able to access this information and hold companies accountable for their actions.

There is significant evidence that if these registries are accepted globally, they would boost asset recovery and, through deterrence, may reduce the flow of dirty cash. A book published by the World Bank, Stolen Asset Recovery Initiative, and United Nations defines a “lack of publicly available registries” as one key barrier to asset recovery. The authors recommend jurisdictions develop and maintain publicly available, centralized company, land, and non-profit registries to enable originating jurisdictions to identify and include the necessary information in requests for seizing or confiscation of assets.

As I said, the story is compelling, but it isn’t simple. It took me three paragraphs to explain, which is a lot more than most politicians want to read. Fortunately, the FTC works with other folks much better at distilling complex concepts and creating engaging campaigns based on complex ideas. Case in point: the new Stash the Cash campaign.

ONE’s Stash the Cash campaign, launched yesterday, includes a fake website and Twitter account to draw attention to the absurdity of just how easy it is to set up an opaque company or trust. The campaign video and website show just how easy (and legal) it is for criminals to set up phantom firms. It’s catchy and absurd, in just the right way for Twitter.

The campaign’s purpose couldn’t be more serious, though. One of its aims is to press Prime Minister David Cameron on the issue of public registries.

To that end, the we’ve seen a big success today. Prime Minister David Cameron has led a charge to change worldwide standards on beneficial ownership. Today, Cameron has promised to make information on the beneficial ownership of companies available on public registries.

Given that phantom firms are a global problem we cannot expect the UK’s movement alone to change the underlying dynamics of dirty money flows. On the other hand, Cameron’s efforts may inspire action in the EU and on this side of the Atlantic, creating momentum toward stronger rules on beneficial ownership worldwide. As a result of the work of FTC Coalition members and our partners, politicians are beginning to understand, and take seriously, the subtle, yet compelling, connection between transparency and development. Now for the rest of them.

Written by Ann Hollingshead

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