New rules updating anti-money laundering regulations in the European Union will see the establishment of central registries listing the ultimate owners of companies in EU countries.
The information will be accessible to any party that can prove a “legitimate interest,” including investigative journalists and other concerned citizens, under a deal struck by the EU Parliament and the Council of Ministers, representing the member states.
The deal on the draft EU anti-money laundering directive still needs to be endorsed by EU member states’ ambassadors (COREPER) and by Parliament’s Economic and Monetary Affairs and Civil Liberties, Justice and Home Affairs committees before being put to a vote by the full Parliament next year.
“For years, criminals in Europe have used the anonymity of offshore companies and accounts to obscure their financial dealings. Creating registers of beneficial ownership will help to lift the veil of secrecy of offshore accounts and greatly aid the fight against money laundering and blatant tax evasion”, said Economic and Monetary Affairs Committee rapporteur Krišjanis Karinš.
Civil Liberties Committee rapporteur Judith Sargentini added that the new rules would provide much greater transparency of the shadowy business structures that are at the heart of money laundering schemes, as well as schemes used by businesses to avoid their tax responsibility.
The rules would require banks, auditors, lawyers, real estate agents and casinos, among others, to be more vigilant about suspicious transactions made by their clients.
If adopted, the fourth anti-money laundering directive (AMLD) will for the first time oblige EU member states to maintain central registers listing information on the ultimate beneficial owners of corporate and other legal entities, as well as trusts.
Central registers were not part of the European Commission’s initial proposal, but were included by members of parliament during the negotiations with the aim to enhance transparency and to make it easier to fight money laundering and tax evasion.
The central registers would be interconnected and accessible without restriction to competent authorities and their financial intelligence units, as well as to banks to carry out their customer due diligence. The public will have access to the information, but online registration and a fee to cover administrative costs may be required.
Any individual or organization who can demonstrate a “legitimate interest,” such as investigative journalists and other concerned citizens, would also be able to access beneficial ownership information such as the beneficial owner’s name, month and year of birth, nationality, residency and details on ownership. Any exemption to the access provided by member states would be possible only on a case-by-case basis in exceptional circumstances.
However, the details of what constitutes “legitimate interest” and what would be subject to exemptions are not defined.
For trusts, the identities of the settlor, trustee, protector, beneficiaries and any other person exercising effective control over the trust have to be disclosed to the central register, but the information is not public and will be available only to competent authorities and “obliged entities” such as banks.
The establishment of beneficial ownership registries was first demanded by the U.K. government at the G8 summit at Lough Erne in 2013. British Prime Minister David Cameron had sought a commitment from U.K. overseas territories and Crown dependencies to create central registries, which agreed to consider the matter, but said they would not be first movers.
Beneficial ownership information is collected in the Cayman Islands, but it is held by corporate service providers and not in a central register.
Premier McLaughlin told the Legislative Assembly earlier in December that “unless such registers become the new global standard …neither we, nor any other overseas territory or Crown dependency intend to go first and intend to have our economy experimented with and potentially damaged.”
Mr. McLaughlin said he supported the principles of beneficial ownership that were agreed by G20 members earlier this year in Brisbane, including the requirement that “countries should ensure that competent authorities, including law enforcement and prosecutorial authorities, supervisory authorities, tax authorities and financial intelligence units have timely access to adequate, accurate and current information regarding the beneficial ownership of legal persons.”
While Cayman already complies with these requirements, it was less clear why the information should be collected in a registry and why the information should be available to the public.
“None of the G20 principles speak to a public registry at all. I suspect this is for a good reason, because it is a bad idea,” he said.