70% of grand corruption cases, when politicians or their associations misappropriate and use public funds for their personal benefit, involve the use of anonymous companies.
Last month’s Luanda Leaks are a poignant reminder of how transnational and complex corruption has become. Isabel dos Santos, Africa’s richest woman, had with her husband received billions of dollars from her father’s government in Angola through a web of more than 400 companies and subsidiaries in 41 countries.
This week, the Tax Justice Network released the Financial Secrecy Index, which assesses the state of financial secrecy in 133 jurisdictions. On average, countries have reduced their secrecy scoring on ownership registration in part by implementing beneficial ownership reforms .
Tackling anonymous companies requires action on multiple fronts: in countries like Angola, where money is being siphoned out of; in the jurisdiction(s) where transfers are arranged from; and in the tax havens where illicit money flows through and can end up.
The 2020 Financial Secrecy Index has revealed that OECD countries are responsible for nearly half of the financial secrecy in the world. In the case of Luanda Leaks, jurisdictions involved in the dos Santos web of companies included Portugal, Malta, the Netherlands, UAE, UK, Switzerland, Italy, the US, Cyprus and France.
At the national level, the results vary, but the global trend is positive and towards less financial secrecy. Significantly, there is a positive shift on disclosing the true owners of companies. It’s good to see the number of countries that have completed beneficial ownership registration (regardless of whether that information is to be made public) more than doubled between 2018 and 2020, and is now at 41. When it comes to publishing beneficial ownership information publicly, the results also show a positive trend: in 2018, only the United Kingdom and Ukraine were publishing beneficial ownership data; today six countries publish data online, with several more set to follow suit as a result of the fifth EU anti-money laundering directive.
In total, Open Ownership has counted 87 countries that have made commitments or started to implement beneficial ownership transparency reforms across the globe. This includes central, public registers, and sector specific disclosure such as that required by the Extractive Industries Transparency Initiative.
We are working with 36 countries across the world to implement beneficial ownership transparency to fight corruption and societal harms like trafficking and modern slavery. We review draft laws and provide guidance every step of the way on how to build systems that generate useful, open data on beneficial owners.
There are good reasons to do so – beneficial ownership transparency helps build business and market confidence, improves governance and tackles corrupt and criminal activities. This is by no means a government exclusive agenda. Business is supportive too, with Katja Hall, former CBI Chief Policy Director stating that ‘Businesses back the creation of a beneficial ownership register which will support efforts to promote transparency and stamp out illicit financial activity.’ The extractive industries have taken the lead, with mining giant Rio Tinto making their own beneficial ownership disclosures online.
It’s time for multilateral organisations like the OECD and the Financial Action Task Force to respond to this catalogue of success by mandating central registers of beneficial owners, with the ultimate aim of making registers publicly accessible, online and in open data formats. Otherwise, we risk perpetuating the current fractured system where basic information on companies cannot be easily found or accessed by law enforcement and other government agencies, let alone journalists, civil society organisations and businesses.
Relying on leaks to uncover bad behaviour is not sustainable or desirable. The Financial Secrecy Index provides a strong indication of where the problem lies. A sensible next step is targeting the vehicle of choice for hiding illicit gains and activities: anonymous companies. Governments and businesses are on board – we must now concentrate on ensuring this window of opportunity is not lost.
 The Financial Secrecy Index scores 133 jurisdictions on 20 qualitative indicators concerning different aspects of legislation related to financial secrecy, and weighting these by a quantitative assessment of a jurisdiction’s share of the global financial market, as outlined in their methodology. One of the four categories that the index’s indicators are measured against – ownership registration – comprises beneficial and legal ownership registration, banking secrecy, laws governing real estate, trusts, foundations and limited partnerships. Within this category, the surveyed jurisdictions have decreased financial secrecy by 4 marks out of 100, making it the second largest contributing category to a decrease in financial secrecy in the surveyed jurisdictions since 2018. For a full explanation of how TJN assess and score jurisdictions, please see their full methodology.