Update: 20/02/14 – Press Release: European Parliament votes to end anonymous shell companies
Global Witness follows the money. Our investigations try to track down who’s behind suspect natural resource deals, to try and stop the money being lost in poor countries, or to help prevent conflict or environmental destruction. However, too often our efforts are brought to an abrupt halt by anonymous shell companies.
For example, we discovered that the son of the president of Equatorial Guinea bought a $35 million mansion in California through a shell company, despite a modest official salary. We exposed how hugely valuable mining concessions in Congo were sold at a fraction of other credible estimates to shell companies in the British Virgin Islands. We have seen how valuable diamond mining concessions in Zimbabwe were allocated to several companies with hidden ownership.
Criminals, tax evaders, corrupt politicians, and other money launderers can hide their identity and their assets behind complicated corporate structures. Think of it like a Russian doll: one company inside another company, inside another company. Throw in some sham “nominee” shareholders and it can be almost impossible to know who owns a particular company. We’ve even created a spoof Idiot’s Guide to Money Laundering to explain how easy it is.
It’s not just Global Witness that finds it difficult to follow these trails. Law enforcement investigators and tax officials have much greater legal powers to track down information than we do, but even their inquiries get stuck trying to unravel some of these labyrinthine company structures that cross multiple borders.
That’s why we have spent the last five years campaigning for an end to anonymous shell companies. We think that the solution is for existing company registers to collect and publish information on the ultimate owners of companies, not just the next step up in the Russian doll chain. In the jargon these people are known as the “beneficial owners” – because they are the ones who really benefit, or profit, from the activities of the company.
This call is backed up by the big development NGOs including Oxfam, Save the Children and ONE. Business leaders, such as Mark Moody-Stuart the former head of oil giant Shell, also support a measure that would be cheap and provide companies with valuable information on their business partners.
And we’ve made some real progress. Last year, the British Prime Minister David Cameron made the issue of anonymous shell companies a key part of the G8 summit in Northern Ireland. He has promised to create a public register of who ultimately owns and controls companies in the UK. France has followed suit.
Today the European Parliament is voting on whether to create public registries across the EU and I’ll be in Brussels to see which way it goes. If the MEPs vote in favour of transparency, which is starting to look likely, it will show that politicians are serious about cracking down on anonymous shell companies. The Parliament will still have to agree a deal with European governments before this becomes law, but it would be a fantastic start.
Transparency over who ultimately owns and controls companies will expose dirty money and hidden identities to daylight, helping to curb the corruption and tax evasion that keeps poor countries poor.
We won’t end poverty or stop exploitation unless we end the use of the anonymous shell companies. Let’s hope the EU does its bit today.
Robert Palmer is the head of the Global Witness Banks and Corruption campaign. Follow him on Twitter at@robertnpalmer.