U.K. to become first country to compile public registry that lists the beneficial owners of companies in a bid to crack down on shell companies used to evade taxes and hide proceeds of corruption and crime.
LONDON (Thomson Reuters Foundation) – The United Kingdom has decided to lift the veil of secrecy over who owns private companies by opening a corporate registry to the public, a move that will make it harder to evade taxes and hide the proceeds of corruption.
British Prime Minister David Cameron will announce the action Thursday in a speech at the Open Government Partnership, an international meeting on how to make governments more accountable. The United Kingdom would become the first country to make information on who lies behind complex corporate structures public.
“For too long a small minority have hidden their business dealings behind a complicated web of shell companies, and this cloak of secrecy has fuelled all manners of questionable practice and downright illegality,” Cameron will say, according to an advance copy of his speech.
Illegal actions harm the developing world by enabling corrupt regimes to stash their money abroad under different identities, and they are bad for Britain’s economy as people evade taxes through untraceable trails of paperwork, Cameron is set to say in the speech.
The prime minister had pledged to compile a registry of the beneficial owners of British companies at the Group of 8 (G8) summit of leading economies in June, but this is the first time he has said the information will be publicly released.
Lawmakers in the United States have proposed bills to require that beneficial owners of companies are made public, but the measures have made no progress in Congress.
Transparency campaigners, some of whom carry out their own investigations into corrupt dealings, have pushed hard for a public registry, saying it would not only help tax authorities in developed countries but also help those in developing countries trace corrupt funds that have been spirited out of the country, which some estimate exceeds the amount given in foreign aid.
“Global Witness' investigations have shown how anonymous shell companies are the get-away cars for crime and corruption. Full credit should go to the Prime Minister and the Business Secretary for acting to take away the keys,” Gavin Hayman, director of campaigns at anti-corruption watchdog, Global Witness said in a statement.
Advocates of financial transparency are now likely to pressure the UK government to ensure that the registry also covers companies that are based in the U.K.’s Crown Dependencies and Overseas Territories and that a second public registry be creating revealing the beneficial owners of trusts.
Territories such as the Isle of Man and the Channel Islands are popular offshore havens where people can hold accounts in corporate structures that hide the ownership as a way to evade taxes or hide proceeds of crime.
“As we take forward this challenge to crack down on corruption, we need the same determination to tackle trusts as we’ve seen here on companies,” Adrian Lovett, executive director of campaign group ONE Europe said in a statement.
“Until trusts are part of the package we risk closing one door to corruption while leaving a back window wide open,” Lovett added. He urged Cameron to push for including public disclosure of corporate ownership and trusts in the European Union’s anti-money laundering directive.
Cameron’s announcement will be made at the OGP summit in London, a meeting of 60 governments which have committed to openness and transparency.
A government spokesperson said that beneficial owners of trusts would not be included in the registry announced on Thursday.
The Financial Transparency Coalition, which has campaigned since 2009 for public disclosure of corporate owners, called on other countries to follow the U.K.'s lead.
“This will go a long way in curbing corruption, money laundering, drug trafficking, tax evasion and financial crime responsible for the continued loss of much needed wealth from the world’s poorest countries,” said Porter McConnell, the coalition’s manager.
The U.K. is currently lead co-chair of the OGP alongside Indonesia and civil society representatives. Its two-day meeting begins on Thursday.
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