Global Financial Integrity

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Anonymous Companies

Getting a Global Legal Entity Identifier Number is as Easy as L-E-I

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The global community recently began implementing a system of transparent, open source ID numbers—Legal Entity Identifiers (LEI)—to help companies, regulators, investors, and the public see how parent and subsidiary companies are related. Global Financial Integrity has been supportive of this corporate transparency tool, and I participated in the early stages of creating the new global LEI system. To test out and demystify the new system, I decided to have GFI register to get its own LEI number. Ten minutes and US$219 later we were done, and now I’m going to explain just how easy the process was.

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Panama Papers Prove Law Enforcement Right on Beneficial Ownership

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“ICE has long recognized the misuse of corporations and limited liability companies (LLCs) formed under State law as a serious threat to the ongoing effort to combat international criminal activities. The lack of corporate transparency has allowed...

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UNCAC Coalition Calls for States Parties to Move on Beneficial Ownership Transparency at 6th COSP

When the States Parties to the UN Convention against Corruption (UNCAC) and official observers gather in St Petersburg next week for the 6th Conference of States Parties (COSP), the UNCAC Coalition will be advocating for enhanced language...

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Norway Latest Country to Adopt Public Registry of Beneficial Ownership

The Norwegian Parliament Building

Other Countries Should Follow Norway’s Example

On June 5, the Norwegian Parliament unanimously voted to establish a public registry of corporate ownership information, becoming the latest country to tackle the abuse of anonymous companies through increased transparency.

Anonymous companies are one of the top tools used by criminals, kleptocrats, tax evaders, and terrorists to launder dirty money with impunity.  Requiring companies to publicly disclose in a central registry their ultimate, human, beneficial owner(s) is regarded as the gold standard in tackling the abuse of these phantom firms.

Norway’s strong endorsement of transparency comes as no big surprise: the Scandinavian country routinely ranks near the top of transparency and anti-corruption rankings, and Norway was the first country to get behind the push to curb illicit financial flows.  Their support on this topic dates back to the formation of the Norwegian Government-led Task Force on the Development Impact of Illicit Financial Flows in 2007 and their financial backing of the Financial Transparency Coalition at its inception in early 2009–long before illicit flows topped the global agenda.

In establishing a public registry, Norway joins Denmark and the United Kingdom—the first country to commit to a public registry of beneficial ownership information back in October 2013.  The UK followed through with its commitment this March by passing historic legislation needed to fulfill its pledge.

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What’s Going to Happen to the FIFA Forfeiture Money?

夜間足球 Nighttime Football (Soccer) by See-ming Lee [CC BY 2.0], via Flickr.

GFI’s Heather Lowe Proposes Reinvesting FIFA Forfeiture Funds in Inner-City Youth Soccer Programs

Following from my blogs on Friday and Monday about different aspects of the FIFA case, I’d like to talk a little bit about the forfeiture funds and penalty payments that the U.S. Department of Justice (DOJ) will be collecting in this case and what will happen to them. A proceeding like the FIFA case can result in a really large pile of cash that will be under DOJ control. Unless the Defendants are acquitted of the charges against them at trial or the DOJ decides to drop the case against a Defendant for some reason, we can expect that the DOJ will be collecting from those Defendants the bribe money that they received, anything they bought with that money that will then be auctioned off (for example, check out the list of real estate that will likely go under the hammer in Florida and Georgia from paragraph 343 of the indictment), and, possibly, additional fines in the form of penalties. It is going to add up.

Recouping Expenses

It is obviously critical that the DOJ, Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS) and other government agencies that were involved in this case are able to recoup the money they spent working on this investigation over the past few years. Another way of looking at it is that they need to keep a sizable chunk in order to ensure that they have the resources to work cases like this over the next few years. No matter how you slice it, that’s important to American taxpayers as well, who pay less in taxes because the DOJ and other agencies are able to fund part of their work through forfeiture and penalty payments instead of through tax dollars. Win-Win.

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A Brief, Recent History of Beneficial Ownership Transparency on the Global Agenda

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Slow but Steady Progress towards Curtailing the Abuse of Anonymous Companies

In June 2013, G8 leaders met in Lough Erne and agreed to a set of principles on beneficial ownership transparency. The principles state that companies should maintain their beneficial ownership information and that the information should be available to law enforcement and other competent authorities; additionally, countries were to consider making such information available to financial institutions and other regulated businesses. Trust information should be collected and available, the principles explained, but only to law enforcement. These principles were largely reiterated by the Financial Action Task Force (FATF)—the body setting international anti-money laundering standards—in their Guidance on Transparency and Beneficial Ownership in October 2014 and by the G20 in their High Level Principles on Beneficial Ownership in November 2014.

Despite the establishment of this baseline, momentum is building since Lough Erne to raise the bar. In July 2013, the UK began the process to establish a central register of information and, after a public comment period, determined that the register should be publicly available—a position strongly supported by Global Financial Integrity (GFI). In April 2014, the European Parliament approved provisions requiring formation of public registers as part of their draft of the European Union’s Fourth Anti-Money Laundering Directive (AMLD), but the E.U. Council and the E.U. Commission have yet to take a public position on the AMLD, delaying its final adoption. Just last month, Denmark announced that it, too, would create its own public registry of beneficial ownership information.

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Are International Institutions Failing to Grasp the Big Picture on Beneficial Ownership?

OECD and FATF Headquarters in Paris, by Celette (Own work) [CC-BY-SA-3.0], via Wikimedia Commons

Everyone Should Be Able to Determine with Whom They Are Doing Business, Writes GFI’s Heather Lowe

On Monday of this week, the Financial Action Task Force (FATF), the body setting international anti-money laundering standards, published new Guidance on Transparency and Beneficial Ownership, detailing a variety of ways in which countries can comply with FATF Recommendations 24 and 25 (which relate to transparency and beneficial ownership of legal persons and arrangements) and sending the message that complaining about the difficulty of compliance is no longer an option.  FATF consulted with the Organization for Economic Cooperation and Development (OECD) on this publication, recognizing that identification of the beneficial owners of legal entities and arrangements is not only a money laundering issue, but a fundamental element of the OECD’s new multilateral automatic exchange of financial information.  What neither FATF nor the OECD appears to have yet grasped, however, is that beneficial ownership – knowing who is ultimately behind a company – is a matter of sound business practice.  Everyone should be able to determine with whom they are doing business.

That lack of understanding was evident on page 21 of the Guidance, where FATF made it clear that it was supportive of countries choosing to create publicly accessible registries for information, as the UK is in the process of creating.  FATF stated that:

“although this is not required by the FATF Recommendations, some countries may be able to provide public access to information through a searchable online database.”

The rationale behind this, they say, is that it:

“would increase transparency by allowing greater scrutiny of information by, for example, the civil society, and timely access to information by financial institutions, DNFBPs and overseas authorities.”

While we civil society folks appreciate what appears to be an attempt by FATF to demonstrate that they have heard civil society’s drumbeat on this issue, unfortunately what this shows is that they have not yet understood the variety of reasons for that drumbeat.

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Voices from Delaware Are Speaking Out Against Anonymous Company Ownership

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Four Delaware Citizens Publish Letters in The News Journal of Delaware Urging their Congressional Delegation to Curb Anonymous Company Abuse

Our campaign to stop criminals using anonymous companies to cover their tracks is getting traction in some unexpected places.

Last month we wrote about how politicians in Delaware were starting to speak out about their state’s role as a corporate secrecy haven. Half of the state legislators had sent a letter to the Delaware Congressional Delegation, urging them to support bipartisan federal legislation introduced by Senators Levin (MI-D) and Grassley (IA-R) to deal with anonymous companies.

A few weeks ago we were invited to speak about this issue at a community forum organized by the Delaware chapters of Americans for Democratic Action and the National Association of Social Workers. I was on a panel with two Delaware state legislators, the head of a local social justice organization and the Deputy Secretary of State of Delaware.

Now we’re starting to see ordinary citizens from Delaware speak out as well. This week there have been a number of letters to the editor in the Delaware News Journal.

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