According to a Global Witness report, most of the European Union member states did not meet a deadline for financial transparency. The rule in question was to create public registers that show companies’ real owners.
The Directive and Its Reasons
The directive requiring member states to create these public registers of beneficial owners was issued in May 2018. The deadline to publish the registers was January of this year, and as of March, only a handful of member states had complied.
The directive from the EU was in response to the Panama Papers. For those in need of a refresher, that scandal showed the extent to which worldwide shell companies were being used for financial crime, corruption, and even terrorist financing.
What Member States Have Done
Global Witness, a leading campaign group, evaluated the situation in March, a full two months following the deadline for the EU directive. The organization found that only six member states implemented the required public register systems. In the United Kingdom, this is through Companies House, where the public can search and bulk download beneficial ownership data for free.
The other member states that have not complied did so to varying degrees. Some did not create the registers at all. Others created artificial hurdles that limit the full access to the public.
Greece, for example, created legislation that would alert the beneficial owners when their companies are searched for. This led to concerns that those who are under investigation by journalists or anti-corruption proponents could be “tipped off.”
Another notable restriction is that five countries will not allow access to the relevant data without the inquiring person first registering with an associated electronic identification system. Portugal and Poland will only let the public look for companies if they have the tax identification number already. Additionally, eight countries have made the registers but placed them behind paywalls. There are also reports that Italy and Greece will create a similar paywall once they have their registers running.
What Global Witness Says
Global Witness representatives have expressed disappointment that the European Union member states are “dragging their feet,” especially considering that they had two years in which to implement the registers.
Those in favor of transparency, such as Global Witness, feel that transparency regarding company ownership is an essential tool for fighting corruption. They also think that fighting corruption is particularly crucial at the moment. Most corrupt people and companies use global financial secrecy to move their “stolen wealth” around.
Global Witness calls for the European Union to directly address the member states that have not yet published beneficial ownership registers, or have not done so in full accordance with the directive, such as by implementing paywalls. Those in favor of transparency also call for the EU to enforce the rules and sanction states that did not meet the deadline.
One of Many Efforts Towards Transparency
The EU directive was to publish free and public beneficial ownership registers. This is one of the many efforts towards greater transparency around the world. Following the Panama Papers, David Cameron’s British government made an international push for countries to publish data that was transparent.
This included a May 2016 international anti-corruption summit. At that summit, Cameron urged other countries to create beneficial ownership registers. This is well before the EU directive was ever announced. The anti-money-laundering directive from the EU came two years later. It was the fifth mandate by the organization against money laundering.
As with all issues related to financial transparency, there is still a great deal of controversy and pushback regarding the EU directive, with both those in favor of transparency and those opposed.
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