PATCHY PROGRESS IN SETTING UP PUBLIC BENEFICIAL OWNERSHIP REGISTERS IN THE EU The EU’s 5th Anti-Money Laundering (AML) Directive requires all Members States to set up a centralised register of the ultimate, or so-called ‘beneficial’, owners of companies and make this information available to the public. Countries were given more than two years to implement these changes, meaning that the registers should have been up and running by 10 January 2020. Global Witness has found progress has been at best patchy with only five having fully and properly done so. The 5th update to the AML Directive came as a inspectors – and public registers are a way of result of the Panama Papers leak in 2016, making this more difficult. which led to the resignations of political We wrote to all EU Member States and leaders and the demise of the law firm and analysed publicly available information to corporate services provider at the heart of find out how well countries are doing in the story – Mossack Fonseca. Just three setting up these public registers. months after the Panama Papers revelations, the European Commission presented plans We found that: to amend the 4th AML Directive. As a result of this, all Member States agreed that greater 17 of 27 Member States (63%) do not yet scrutiny by investigative journalists and civil have a centralised register of the society organisations will help to prevent the beneficial owners of companies which is abuse of anonymous companies by the available to the public. This category criminal and the corrupt. includes some countries which do not yet have a register of beneficial owners which is We at Global Witness have been campaigning accessible to members of the public with a for beneficial ownership information to be legitimate interest, which was required to made public for more than ten years. have been implemented by the 4th AML Anonymously-owned companies are one of Directive by June 2017; some countries that the key tools used by money launderers and expect to implement a fully public register tax evaders to hide their ill-gotten gains and soon; and some countries that claim to have taxable assets from law enforcement and tax a public register but whose registration requirements make it available only to GLOBAL WITNESS 1 BENEFICIAL OWNERSHIP REGISTERS IN THE EU MARCH 2020 citizens or residents of a few European include setting up a paywall or only being countries which in our opinion does not able to search using a company’s tax constitute public access. identification number. 5 of 27 Member States (18.5%) have a 5 of 27 Member States (18.5%) have centralised register of the beneficial implemented a public register which is owners of companies which is available to free to access. The UK is also in this the public but with significant restrictions category. that hinder its usefulness in combatting money laundering. These restrictions We congratulate Bulgaria, Denmark, Latvia, the centre of a 2014 leak of information Luxembourg and Slovenia for having set up published by the International Consortium of free public registers of the beneficial owners Investigative Journalists about its tax rulings. of companies, and have given them a green It would seem that scandals and public grading in our analysis. This top category pressure have played a useful role in pushing includes three countries which have been hit countries to become more transparent more by recent money laundering or tax evasion quickly. scandals. Denmark’s biggest bank, Danske We encountered a number of problems Bank, was involved in one of the world’s : largest money laundering scandals. Latvia with registers that countries have set up has been linked to the ‘Troika Laundromat’ Limiting access to the register. Four exposed by the Organised Crime and countries – Belgium, Croatia, Portugal and Corruption Reporting Project via the use of Sweden – require people to register by using nominee directors, and one of its banks was an electronic identification system that shut down by the US for links to money would appear to be available only to citizens laundering and North Korea’s nuclear and residents of a few European countries. weapons programme. Luxembourg was at GLOBAL WITNESS 2 BENEFICIAL OWNERSHIP REGISTERS IN THE EU MARCH 2020 Greece is expected to do the same. This does impose fees once the register is set up. Malta not constitute the ‘public’ access that is imposes fees, but makes the beneficial required by the 5th AML Directive and we owners’ information accessible only to have therefore graded these countries as people who agree to use the information for red. the purpose of carrying out customer due diligence (e.g. banks and lawyers). The fees Tipping off beneficial owners. At least range from €1 per company (Estonia) to €7 one country – Greece – states that the per company (Finland) and include, in the beneficial owners of companies will be case of Sweden, a one-off payment of €41 or, informed if someone has searched for them in the case of Greece, a payment to be made (apart from if the search was carried out by of €20 for every 10 searches carried out public authorities). This is highly problematic (rather than for information obtained). It is as any money launderer, tax evader or possible that there are more countries that terrorist financier will be tipped off that they intend to set up paywalls as we do not know are being investigated, enabling them to re- the intentions of some countries that have incorporate the company elsewhere or not yet set up their register. The 5th AMLD otherwise attempt to cover their tracks. Directive allows for countries to charge Indeed, the global anti-money laundering people for access to beneficial ownership standards are so concerned about the information as long as the charge does not potential for tipping off that they forbid exceed the administrative costs of making financial institutions from informing the information available (which, in the case customers if they suspect them of money of some of the larger fees, we wonder laundering and have informed authorities whether this could be true). We have graded about this. any country that has a paywall in place as Making it hard to search for companies. amber because meaningful anti-corruption Two countries – Poland and Portugal – investigations often require access to require users to know the tax identification multiple documents, quickly turning a small number of a company in order to be able to fee into a high paywall, constituting a search for its beneficial owners. While it significant barrier to use for investigative seems that this information can be found journalists and civil society groups, online for most companies, the beneficial particularly given that it is essential for ownership register does not tell users where investigators from the Global South to find to go to find it out and it took us some time out who owns European companies. to find. We cannot think of any reason why There are 17 countries which do not such an obstacle should be placed in the way appear to have a beneficial ownership of users and have therefore graded countries register that is open to all members of the with these types of obstacle as amber. public. This includes six countries – Czechia, Setting up paywalls. Seven countries – Finland, France, Portugal, Romania and Austria, Belgium, Estonia, Finland, Germany, Spain – which have a register but only make Ireland, and Sweden – require users to pay in it available to people that can demonstrate order to access beneficial ownership legitimate interest or purpose of use, four information. Two additional countries countries – Belgium, Croatia, Portugal and (Greece and Italy) suggest that they will Sweden – that make the register available GLOBAL WITNESS 3 BENEFICIAL OWNERSHIP REGISTERS IN THE EU MARCH 2020 only to citizens or residents of a few information on companies is available to. We European countries, and eight countries – have not looked at how well Member States Cyprus, Greece, Hungary, Italy, Lithuania, have done in implementing the registers of Malta, Netherlands and Slovakia – which the beneficial owners of trusts that the 5th either do not appear to have any beneficial AML Directive requires to be made available ownership register as yet or have one, but to anyone with a legitimate interest. Neither not one that is available to members of the have we looked at the quality of the public with a legitimate interest. All of these company data – the percentage of countries have been graded red, but they companies that have reported who their encompass a wide range of situations. For beneficial owners are, nor whether there is example, France has passed legislation that any system in place to verify the self- will set up a public register that is free to use reported data. Our previous analysis of UK and that is expected to be up and running beneficial ownership data which identified soon, whereas in Malta it is only possible to important data quality and verification gaps access beneficial ownership information for as well as suspicious entries was only the purpose of carrying out customer due possible because of the register’s availability diligence, making the register not compliant as open data. For this reason, we strongly with the 4th AML Directive (which requires recommend that Member States set up open access to anyone with a legitimate interest), data registers. let alone the 5th AML Directive. We call on the European Commission to get We have written extensively in the past on tough with the Member States that have why beneficial ownership registers should be failed to properly implement the 5th AML public; why it’s important that they are set Directive.