The idea of putting beneficial ownership in the public domain is a popular one. But such a decision should be well thought-through, warns an Australia-based academic who has examined how to track down dirty money.
(An earlier version of this article was published today on sister publication WealthBriefing but the editors hope that readers of Family Wealth Report will also find it of interest.)
A topic that is all the rage in the world of international financial centers is “beneficial ownership”. Last week’s two-day conference in London on fighting corruption saw more attempts to publish such information to weed out dirty money. The issue is complex and controversial because public registers are, so some jurisdictions such as the British Virgin Islands fear, a threat to legitimate client privacy.
It is by no means self-evident that public registers will be the silver bullet to stop flows of illicit funds, so an Australia-based academic has argued recently. That person is Jason Sharman, of Griffith University. A recent report, commissioned by Jersey Finance, questions the efficacy of public registers and urges the financial industry to consider the case for corporate service providers, or CSPs, instead. As the Panama Papers saga continues to bedevil IFCs and spread fears that the whole industry is being unfairly tainted, it is all the more important to focus on this issue. This publication recently interviewed Sharman about his report and where he thinks progress can be made.
Please explain your background and how you got to be working in this area.
I began looking at tax havens and the OECD harmful tax competition initiative in 2002, an interest that subsequently developed into looking at anti-money laundering policy, and then anti-corruption. In all three areas - tax, anti-money laundering and countering large scale corruption - beneficial ownership is key.
In broad terms, what is your opinion of how policymakers in many countries are addressing the beneficial ownership question?
This varies by country: the US is in denial about the inadequacy of its beneficial ownership regulations, whereas in the European Union and UK this issue is rightly seen as important and urgent. Less positively there is a rather uncritical faith in centralized registries of beneficial ownership as a silver bullet, and a corresponding neglect of enforcing regulations mandating that intermediaries establish beneficial ownership.
What is the main argument against public registers of beneficial ownership and why?
The main argument against centralized registries of beneficial ownership is that this solution is largely untested, and that it relies on unverified self-declarations of beneficial ownership. Public registries are also accused by some of violating privacy.