It's not only possible and safe to publish who benefits from assets as many governments already do, enabling work that has helped change public policy for the better beyond tax evasion, experts said during a virtual so-called community lab hosted by the nonprofit organization Open Ownership. Representatives of the International Consortium of Investigative Journalists, Tax Justice Network and Natural Resource Governance Institute gathered to discuss how corporate ownership data, including public beneficial ownership registries, can help people who expose human rights abuses when combined with strict regulations on market participation.
"The more transparency laws appear, the more sophisticated the schemes become … so additional work needs to happen beyond the liberation of data itself that allows everyone to explore [and] research beneficial ownership information," said Emilia Diaz-Struck, ICIJ's Latin America coordinator and research editor.
Diaz-Struck said that after the ICIJ published the Pandora Papers last October, the Paradise Papers in 2017 and the Panama Papers in 2016, stakeholders across the globe pressured public officials to change financial secrecy laws in ways that help expose corruption.
Alexandra Gillies, adviser at the Natural Resource Governance Institute, agreed that over the past five years, there has been a ton of progress on beneficial ownership transparency.
"The other big challenge is that even when ownership information is available, either because it's reported, or through a leak, or maybe it was never secret to begin with … it's not always actionable for fighting corruption and fighting kleptocracy," Gillies said.
Kleptocratic countries, in particular, are often run by political elites who aren't beneficial owners of companies from which they receive favorable treatment, Gillies said, adding that proxy relationships are often more important. Proxy relationships expressed through networks of legal ownership of shell companies allow people convicted of human rights violations to hide their participation in the economy, said Gillies, author of a book on oil sector corruption.
"So whenever a big leak comes out and there's lots of details and ownership information about Russian companies and Russian oligarchs and stuff, everyone digs through, and is like, 'Where's Putin? Where's Putin?'" Gillies said, referring to Russian Federation President Vladimir Putin.
"He's never there," said Gillies. "And, at least, from my take on things, he's never going to be there, because he doesn't actually have an ownership relationship with most of these companies that are controlled by his favorite oligarchs."
Instead, Gillies said, Putin lets certain individuals make money, then he tells them what to do with the money.
"It's not that he actually is the beneficial owner of these companies," Gillies said.
Originally, people who created a company would register the company to gain limited liability, thereby establishing a clear link between the company and its beneficiaries, according to Andres Knobel, senior researcher at the Tax Justice Network.
"Secrecy was never meant to be a privilege or even a right for companies," said Knobel, adding that it's good for human rights activists to begin questioning the philosophical boundaries of transparency. Knobel said prior to globalization, "shareholders would also be the beneficial owner, and that information was always public."
For example, in Latin America, many ownership registries were termed "'public commercial registries'" because the lawmakers intended the data to remain public knowledge, Knobel said. However, Knobel said, in today's world, "people can establish a charity or a charitable trust to finance terrorists, not just to evade taxes."
Knobel said beneficial ownership transparency is usually perceived as being helpful for exposing tax evasion, money laundering and petty corruption, but it's important to "make the point that beneficial ownership is not just about financial disclosures, it's really about helping investors [and] helping enforce human rights," Knobel said.
Gillies said ownership reporting efforts disclosed that many family members of the Democratic Republic of the Congo's former president participated in the mining industry, which helped generate a conversation.
"But it was all legal because the country has relatively weak conflict of interest rules, and even the ones that are on the books are not enforced very well," Gillies said, adding that phenomenon is by no means limited to developing countries.
"So you can have all the ownership information, but if those 'inappropriate owners' [i.e. family members of political elites] are legal, or allowed … to have those shares," it's more difficult to address the underlying corruption, Gillies said.
Once beneficial ownership data becomes publicly available, it's important to have investigators linking the disclosed data to human rights violations, the panelists said.
Contrary to what opponents say, Knobel said, "the truth is there's no evidence that actually opening up beneficial ownership registries will create any crime — I mean, this has happened not only in Sweden or Denmark … but also Eastern European countries now, like Ukraine, North Macedonia and Albania are also opening up their registries."
Beneficial ownership registries can have synergistic effects, such as in Latin America, where Knobel described how investigators found the passport number of an Argentine CEO because he was the beneficial owner of a company in Ecuador, which has a public register.
"If Panama or Ecuador, let alone North Macedonia, are doing it, not just Denmark and the U.K., then clearly there is an argument, and a possibility" for the U.S., Knobel said. This year, for the first time, his organization ranked the U.S. in an annual index as the world's top destination to hide income.
But even publicly available beneficial ownership registers are often unusable for investigators from a practical standpoint, Diaz-Struck mentioned, such as when they cannot be downloaded, or aren't searchable except by company name.
By leaking verified data, Diaz-Struck said she and her ICIJ colleagues exposed beneficial ownership information about thousands of companies registered in places such as the British Virgin Islands, along with hundreds of public officials.
"The more work each actor in [their] role brings transparency, then it also has an impact on the people," Diaz-Struck said, "but keeping an eye on how things change: I think that's the lesson for us, over all this time, and this discussion, it's like 'Yes, more transparency, but how do things change?'"
--Editing by Roy LeBlanc.
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