On Thursday, June 6, the Financial Accountability and Corporate Transparency (FACT) Coalition, wrote a letter to U.S. President Obama, urging him to support increased transparency over who owns and controls companies by joining UK Prime Minster David Cameron in calling for all G8 states to commit to creating public registries of corporate beneficial ownership information. To read more on the problems of hidden company ownership see Global Witness' briefing on anonymous companies.
Dear Mr. President,
On behalf of the Financial Accountability and Corporate Transparency (FACT) Coalition, I am writing to urge you to support increased transparency over who owns and controls companies by joining UK Prime Minster David Cameron in calling for all G8 states to commit to creating public registries of corporate beneficial ownership information.
The U.S. is leading the international community in the fight against money laundering and the financing of terrorism. Your Administration has been a leader on transparency and curbing corruption through its support for mandatory disclosure rules for the oil, gas and mining sectors codified in the Dodd-Frank Act. U.S. leadership on this issue spurred action in the European Union, and provides the basis for a new global transparency standard. Additionally, your Administration has led the way on the automatic exchange of tax information through the Foreign Account Tax Compliance Act (FATCA), which has catalyzed action in Europe.
Unfortunately, the ability to incorporate anonymously in the U.S. and abroad undermines these efforts. Recent studies have revealed that the U.S. is a favored place for incorporating shell companies used to hide stolen assets, dodge taxes, defraud Medicare, evade sanctions, launder drug money and sell illegal weapons around the world. Many U.S. states rank among the easiest jurisdictions in the world to form a company without revealing the identity of who ultimately owns or controls it.
There is growing global momentum to address this issue. Prime Minister Cameron has publicly stated that beneficial ownership transparency is a key priority at the upcoming G8 Summit and urged G8 and EU members to “break through the walls of corporate secrecy.” He has called on G8 leaders to publish national action plans detailing how they will achieve this, including “by enhancing the availability of beneficial ownership information through central public company registries.” Prime Minister Cameron is also advocating that the UK’s overseas territories and crown dependencies get their own houses in order. A strong G8 commitment would push the overseas territories to act, creating a level playing field between the U.S., our G8 partners and the “island havens.”
The G8 Summit provides an opportunity for you to make meaningful progress on your Open Government Partnership commitment to advocate for meaningful disclosure of beneficial ownership information. We are concerned that the Administration is only supportive of the collection of beneficial ownership information for companies, but is opposed to public registries of beneficial ownership at the G8. This may be encouraging other G8 countries to avoid taking action on this issue. We believe this position is inconsistent with your Administration’s broad support of financial transparency and open government.
There are many reasons why beneficial ownership information should be in the public domain. These include anti-money laundering efforts, sound corporate governance, financial stability, and knowing with whom you are doing business. The corporate form was never intended to enable anonymity; rather, corporations were originally created to limit liability to encourage our great entrepreneurs to bring their ideas for industry and progress into the marketplace. We support the important public policy goal of limiting personal liability for corporate action, but we do not support using companies as a foil to abdicate responsibility.
Finding out who ultimately owns or controls a company should be as simple as checking a corporate registry. Public registries of beneficial ownership information would allow civil society, journalists and academics to help identify inaccuracies in companies’ beneficial ownership disclosure. This would complement the efforts of law enforcement, which lacks the resources to verify the owners of millions of companies. It also would enable civil society to hold companies accountable for their actions.
Making the identification of beneficial owners the responsibility of financial institutions alone is inadequate. If this information was in the public domain, banks could access it as part of their customer due diligence obligations to identify who is really behind their corporate clients. Furthermore, public registries of beneficial ownership information around the world would improve the ability of foreign banks to comply with FATCA, therefore increasing the revenue returned to the United States.
We strongly encourage the U.S. to take advantage of this window of opportunity and support public registries of beneficial ownership information at the G8. With this action, you can help ensure that the U.S. does not slow global momentum toward beneficial ownership transparency or stymie the efforts of other countries interested in carrying this agenda forward.
We look forward to continuing to work with you and your Administration to advance efforts to promote beneficial ownership transparency and would welcome the opportunity to discuss this issue with your staff. If you are interested in more information or to schedule a meeting, please contact Stefanie Ostfeld ([email protected]) or Heather Lowe ([email protected]).
Founding Member, FACT Coalition
Chair, Tax Justice Network USA