The "Irony" of Public Registries in the United States
March 13th, 2014
March 13th, 2014
As someone who loves to obsess over grammar rules of all kinds, I’m careful when using the word “irony.” It’s a notoriously difficult word to use. That’s why, as I was pondering the U.S. policy position on beneficial ownership and the word “ironic” lingered in the edges of my mind, I pushed it away. No, the U.S. policy position on beneficial ownership is not ironic. It’s merely hypocritical. And, like the list of ironies in the Alanis Morsette song, at least a bit tragic.
This has been a good few months for policies on public registries of beneficial owners. These policies require companies, trusts, and foundations, to not only gather information about their beneficial owners (that is, the flesh and blood person who controls them), but also to publish it in the public domain. The information is free, widely, 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.
Last October, UK Prime Minister David Cameron announced the United Kingdom would create a public registry of the beneficial owners of all companies registered in the UK. And yesterday the full legislative body of the EU Parliament voted to require public registries of beneficial ownership information for companies incorporated in the European Union.
The moves by these European nations increase the pressure for the United States to follow suit. Especially since the nation is already woefully behind in this domain. In fact, the United States isn’t close to the stage of making these registries public – it’s still working on legislation that would create these registries for law enforcement officials. Oddly, this isn’t even the part that is tragic.
The tragic part of the story is that the United States has increasingly spoken out against tax evasion and money laundering. It’s also basically the world’s foremost provider of corporate vehicles to both domestic and foreign beneficial owners. At the same time—and while the data is shaky—the United States likely shelters a huge number of shell corporations, which foreign citizens use to launder corrupt earnings or hide income. Behind Kenya, the United States is the second easiest country in which to incorporate a shell company. According to the Treasury Department, these U.S. shell companies facilitated about 18 billion dollars in illicit transactions in 2005 alone.
Following the G8 summit last year, the White House committed to ensuring “law enforcement authorities, including tax authorities, will be able to access beneficial ownership information upon appropriate request through a central registry at the state level.”
Yet even this commitment falls short. As Stefanie Ostfeld, a senior policy advisor with FTC member Global Witness, an advocacy group and member of the Financial Transparency Coalition, pointed out: “It is important that the United States has committed to creating registries of beneficial information, because this does go beyond the G8 declaration. But it’s not putting that information in the public domain, as the United Kingdom is saying it will do. Without such a commitment, these moves will not live up to their potential impact.”
There is significant evidence that if these registries are accepted globally, they would boost asset recovery and, through deterrence, may reduce the flow of illicit money. The United States is a critical component of a much-needed global system of public registries. It is time for the United States to take this step leap forward.