The Panama Papers leak has revealed a massive web of illicit and unethical behaviour by some of the world’s richest and most powerful people.
The scope of this leak is truly mind-boggling. But the depth and reach of this scandal only confirms what many who have been working to expose these practices already knew: that the existence of anonymous companies, and the resulting corruption, tax avoidance and other illicit and illegal activities that stem from them, were a significant problem, bad for business, and a tremendous drain on socio-economic development around the world. According to some estimates, $7.6 trillion sits in offshore tax havens – equivalent to as much as 8 percent of all the world’s financial wealth according to UC Berkeley economics professor Gabriel Zucman.
The B Team, along with OpenCorporates, The Web Foundation, ONE, Transparency International, Open Contracting Partnership and Global Witness this week announced plans to create the world’s first global public beneficial ownership register to help end this pernicious and unethical practice..
Beneficial ownership transparency is a system where the true owners of companies can be uniquely identified, eliminating the ability to use anonymous shell companies to hide illegal or corrupt activities. The global register will be an easy-to-use web platform for companies to self-disclose ownership information and encourage more companies to adopt this standard of transparency. Where there are public registries, the global register will combine this information, allowing companies to do their due diligence more efficiently on some suppliers and partners.
The importance of corporate transparency has never been more clear. We believe that making company ownership transparent is critical to tackling corruption, and that there is a strong business case for doing so. Over 2015 The B Team worked with businesses around the globe to articulate specific business use cases for beneficial ownership transparent. We found some of the benefits to business of beneficial ownership transparency include:
- Better knowledge of customers; ensuring compliance with anti-money-laundering and anti- corruption regimes for banks and financial institutions, luxury goods sellers and real estate
- Allowing companies to identify and manage network and supply chain risks when dealing with 3rd parties
- Preventing corruption and ensuring fair competition for large scale projects and government procurement
- Help to overcome some of the significant challenges navigating new markets without a trusted local partner to avoid potential liability
- Investors and analysts seeking greater transparency can assess the risk and credentials of entities for ethical investment
No global system for beneficial ownership transparency currently exists. The UK, Norway and Netherlands have all announced public registries containing beneficial ownership information. Even where progress is slow on the national level, sector specific projects such as the Extractives Industry Transparency Initiative, local governments such as Sao Paulo, or development bodies such as the World Bank are taking charge and adopting public beneficial ownership requirements. Bit by bit, the world is coming to see that transparency around corporate control and ownership is not just essential to tackle corruption, but a foundation for good business.