The menace of benamis.
In recent months, cross-border corruption scandals have rocked Pakistan. Many of these cases have a common denominator: anonymous bank account holders (benamis). These accounts hide the identity of the person at the source of the funds and are being used to not only launder stolen money, but also to operationalise corrupt deals by using companies and offshore accounts to pay bribes or buy influence.
According to the Transparency International (TI) Newsletter dated November 30, 2018 these anonymous account holders hide the identity of those that ultimately own, benefit or control a company or legal arrangement, the beneficial owners. The TI Newsletter admits that it's not possible to successfully fight against corruption without solid policies and legal frameworks that tackle the use of anonymous companies. 'The cross-border flow of payments, remittances, aid and investments is integral for globalisation. Ensuring transparency in such cross-border financial transactions is critical for the stability of the global financial system.
'A key goal for policy-makers has been the necessity to identify beneficial ownership in multi-country financial transactions to protect against money laundering, terrorist financing and tax evasion, which have besieged developed and developing countries alike. 'Existing global efforts on tracing Beneficial Ownership are insufficient since verification is limited to self-disclosures and by national regulations. What is needed is a global framework to enable data exchange, cross-referencing, tracing and analysis of data on cross-border financial transactions.
'To overcome this, the G20 requested institutions and standard-setting bodies such as the IMF, BIS, OECD, FSB, FATF, UN and others to publish guidelines for compiling and validating data on flows that included payments and investments. Their efforts have made it clear that identifying Beneficial Ownership of entities participating in a financial transaction is a priority.' Meanwhile, advances in transparency are said to be taking place in the European Union, Latin Americaand potentially even in tax shelters such as the Cayman Islands or the British Virgin Islands. According to FATF beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.FATF requires Beneficial Ownership information be stored and updated by the relevant national authorities to be made available to other countries upon request. This database may be maintained as a national registry or by individual companies. G20 has also published High-Level Principles on Beneficial Ownership calling for timely exchange of data with international counterparts. IMF has identified 20 categories including securities statistics, international banking and public sector debt across which countries are required to collect data, inter alia, to reveal the 'from whom-to-whom'. OECD provides a framework for disclosing tax details through the Automatic Exchange Of Information initiative (AEOI) between countries. Transparency in beneficial ownership is one of the leading concerns of the C20 Anti-Corruption Working Group.
Representing civil society, the C20 is one of the seven Engagement Groups of the G20, and has made concrete proposals that G20 countries should implement in order to tackle the abuse of anonymous companies: 1. Timely access to sufficient, accurate and up-to-date information about companies and the people who ultimately own and benefit from them is vital in order to tackle corruption, money laundering and tax evasion. Information is the key and, without public registers, getting and sharing information is very difficult. A public, central register is the most effective and practical way to avoid diverging standards in access to beneficial ownership information and to facilitate cross-border investigations and international cooperation. 2. Request all companies that bid for public contracts to publish beneficial ownership information in order to identify potential conflicts of interest, reduce the opportunities for collusion between linked companies, create fair competition for companies and ensure full knowledge of who is ultimately benefitting from public money. This is an easy solution for countries facing delays in the implementation of their public, central beneficial ownership registers.
3. Use existing platforms, such as national anti-corruption strategies or Open Government Partnership (OGP) National Action Plans, to draw all the international commitments linked to beneficial ownership into the national sphere, in a format that is more easily implemented and context-specific, and with a specific deadline.