Most EU member states have failed to meet a legal deadline to introduce public registers of the real owners of companies, a transparency measure seen as key to fighting money laundering, according to a review by anti-corruption campaigners.
In May 2018, the European Union passed a directive obliging member states to publish the beneficial owners of firms registered in their jurisdictions by January this year.
The requirement was a response to the Panama Papers scandal, which exposed how anonymous shell companies around the world were being exploited for corruption, financial crime and terrorist financing.
The Panama Papers are a leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with a network of international partners, including the Guardian, in April 2016.
The documents show the myriad ways in which the rich exploit secretive offshore tax regimes. Twelve national leaders were among 143 politicians, their families and close associates shown to have been using offshore tax havens. They included the Pakistani prime minister, Nawaz Sharif; the former vice-president of Iraq, Ayad Allawi; the president of Ukraine, Petro Poroshenko; and the prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.
An offshore investment fund run by the father of the then British prime minister David Cameron avoided paying tax in Britain by hiring residents of the Bahamas to sign its paperwork.
The leak is larger than the US diplomatic cables released by WikiLeaks in 2010, and the secret intelligence documents given to journalists by Edward Snowden in 2013.
Two months after the deadline and two years after governments were told to get new systems up and running, leading campaign group Global Witness has found only six countries have implemented public register systems that meet the transparency criteria set out in the EU directive.
The UK, which committed to comply with the directive despite leaving the EU, now provides free, searchable and bulk download access to beneficial ownership data through Companies House.
The remaining member states have either failed to create the registers, or have imposed various artificial hurdles inhibiting full public access, Global Witness found. At least one country, Greece, has legislated for notification of beneficial owners if someone has searched for their companies, raising concerns about potential “tipping off” of those under investigation by anti-corruption campaigners or journalists.
Other restrictions listed in the Global Witness report include:
Five countries refuse access to the data unless those inquiring register their own details with an electronic identification system.
Both Portugal and Poland prevent the public from searching for a company unless they already know its tax identification number.
Eight countries have placed their registers behind paywalls, with Greece and Italy also reportedly planning to paywall their registers once they are fully up and running.
“Transparency over company ownership is a key tool in fighting corruption, in an age where the corrupt have exploited global financial secrecy to move around large sums of stolen wealth,” said Tina Mklinaric, a campaigner at Global Witness.
“It’s disappointing that despite having two years to get this right many of those in the EU are still dragging their feet.
“At the appropriate moment it’s vital that the EU addresses its members who have yet to publicly reveal company ownership. This means being prepared to sanction those that have not met its deadline, and enforcing the rules that it has gone to great pains to set.”
Moves to make the true, or beneficial, ownership of companies began in the wake of the Panama Papers scandal, in which data leaked from a Panamanian law firm revealed a panoply of anonymous offshore companies being used to commit tax evasion and other crimes.
In response, the British government under David Cameron mounted an international push to encourage countries to publish transparent data.
The UK hosted an international anti-corruption summit in May 2016, where Cameron called upon other countries to introduce beneficial ownership registers to tackle global corruption. The EU passed its fifth anti-money laundering directive mandating public registers for all member states two years later.
