EU Beneficial Ownership Data
Identifying Ultimate Beneficial Owners can be challenging for regulated firms. Financial criminals are adept at obscuring the true identities of Beneficial Owners by using complex legal structures and shell companies to launder illicit funds. Greater transparency and public access for company registries is a key focus for both the UK and European Union (EU). However, the latest Transparency International report highlights the lack of availability and accessibility of beneficial ownership data in some EU countries. Read our latest blog to learn more.
Transparency International report: Beneficial Ownership data in the European Union
The European Union (EU) was among the first to take serious steps aimed at improving transparency in company ownership. Most notably, in 2015, the 4th EU Anti-Money Laundering Directive (AMLD) required countries to establish beneficial ownership registers. In 2018, in response to scandals such as the Panama Papers and Paradise Papers, the EU approved the 5th EU AMLD, which contained further measures for enhancing the ability of competent authorities – both inside and outside the EU – to detect and investigate money laundering and financial crime.
The 5th EU AMLD, however, does more than that. Recognising that transparency can be a powerful deterrent, it also sets measures for preventing money laundering and financial crimes. What is more, by recognising the importance of public scrutiny of company and beneficial ownership data to preserving trust in the integrity of business transactions and of the financial system, it requires countries to open up their beneficial ownership registers to all members of the public.
Three years after the 5AMLD adoption and more than a year after the deadline for transposing key measures at the national level, there is still a great deal more to do to ensure EU public beneficial ownership registers can be accessed easily across the Member States. Transparency International new report highlights the need for regulated companies to be more aware of, and mindful of, verifying and monitoring beneficial owners of their clients.
The UK has played a leading role in increasing company ownership transparency by making its company registry publicly accessible since 2016. Despite this welcome move, successive global money-laundering scandals, including the recent so-called FINCEN Files, have continued to highlight the attractiveness of UK companies to abuse by global criminals and kleptocrats, attracted perhaps by the low cost and ease of company formation in the UK and the (currently) unverified nature of the data.
Recognising these shortcomings, the UK’s Economic Crime Plan made reform of Companies House a priority and following a consultation in 2019, the Government brought forward its proposals to reform Companies House in September 2020. These include plans to introduce compulsory identity verification to help deter and detect fraud and money laundering; and giving Companies House greater powers to query, investigate and remove false information in the register.
It’s great to see Companies House taking a more proactive approach to verify the PSC register, but they have put the onus on regulated companies to monitor for inaccuracies. At NorthRow we look forward to the day that we see Companies House verifying and monitoring the data that they hold, and given the appropriate legislative teeth to deal with misreporting.
If you would like to learn more on how NorthRow can simplify the complexities of identifying and monitoring Ultimate Beneficial Owners and automate client due diligence of companies, do not hesitate to get in touch or schedule a call.