The US tackles how to actually log who owns corporations
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TRANSPARENCY
Somewhere in an office of the U.S. Treasury Department’s Financial Crimes Enforcement Network – FinCEN – employees are poring over the more than 200 comments they received after asking for suggestions on how to craft the rules governing the country’s new beneficial ownership registry. When I was a young journalist, I was often instructed (by my boss, a grizzled Yorkshireman): “Don’t focus on process, lad; focus on outcomes. No one cares about process.” Well, I’m pretty grizzled myself now, and I’m going to focus on process as much as I like, because this is a really big deal. Shell companies are the getaway cars for kleptocrats, crooks, thieves, tax-evaders and villains, and the sooner we get rid of them, the better it will be for everyone (except for kleptocrats, crooks, thieves, tax-evaders and villains).
Up to now, when it’s come to corporate transparency, the U.S. played the role of the biggest, richest and most popular gang member who won’t give up his life of crime. Other gangsters had gone straight but, as long as Uncle Sam kept stealing purses and jacking cars, there wasn’t much incentive for others to join them. Thanks to the Corporate Transparency Act, the U.S. has finally decided to clean up its catastrophically awful corporate system (it’s long been easier to get a shell company than a library card in many states), and suddenly other countries are quitting the gang too.
Why is corporate transparency important? Read this story about European social media influencers being asked to undermine the confidence of their millions of followers in Covid-19 vaccines. Clearly, something was going on, and whatever it is was nefarious and important, but who was behind it? Thanks to the UK’s corporate registry being openly accessible, the journalists could see who stood behind the shell companies involved and trace the disinformation campaign back to a Russian with ties to Kremlin elites.
- “The woman, Yulia Serebryanskaya, is a veteran of political campaigns and event planning for the ruling United Russia party, and briefly ran as an independent for election in the Moscow city elections in 2019,” the investigation concluded.
The more countries report who owns their companies, the harder it will be for scoundrels to hide their identities while doing harm (if you would like this idea expressed in a more cogent and/or coherent way, here is a really useful policy paper from Open Ownership doing just that). Previously, thanks to the roadblock of the United States, it would have been unimaginable that the G7 could have taken decisive action to force all countries to start collecting reliable corporate ownership information. But this year, we can dream.
- “Anonymous shell companies have become a tool of kleptocrats and organized crime groups involved in the trafficking of drugs, arms, endangered species and people. They have also become a tool of malign foreign policy targeting democratic societies,” wrote Transparency International in a letter to the leaders of the G7 nations. “When you meet on 4-5 June, we urge the G7 to show its leadership and support a meaningful review of the current global standard on beneficial ownership to ensure it is fit for purpose.”
Of course, it is not enough just to commit to action; sadly, the action actually has to be taken (I won’t actually lose five pounds unless I do in fact stop eating cake at 11 o’clock every morning). In 2015, EU countries took the step FinCEN is currently debating, and established corporate registries. Three years later, they committed to opening up those registries and making them public, by the beginning of this year, as part of their fight against money laundering. So how’s that going?
According to this analysis, some EU members are really struggling to give up the cake. Hungary, Italy and Lithuania haven’t even taken the first step and created a central registry, while another six countries — Cyprus, Czech Republic, Finland, Greece, Romania and Spain — are yet to make theirs public. Even elsewhere, there are effective limits on searching the databases, such as the searcher having to be a citizen of the country in question. The cost of kleptocracy is overwhelmingly borne by the citizens of poor countries, so if their representatives are unable to gain access to shell company ownership data in rich countries, that is quite clearly not good enough.