As published on irishexaminer.com, Monday November 4, 2019.
The new rules for disclosing ownership offshore trusts, shell companies, nominees, and numbered bank accounts show that the authorities are getting serious. Discretion is no longer assured in financial dealings.
Financial crime often has two dimensions: how to carry out the crime, and then how to hide the proceeds to escape detection or confiscation.
For many years, governments have beefed up their resources in tackling the concealment of these ill-gotten gains. In Europe, the effort has been coordinated with anti-money laundering directives, created by the EU. These directives are sets of rules applicable across all the EU member countries.
They are designed to ensure that common standards are applied and that European companies and financial institutions are not havens for storing or concealing the proceeds of crime.
A recent EU directive creates what has become known as the register of beneficial owners.
While a company is a legal entity in itself, every company is ultimately owned by people. The law ensures that every company (and every industrial and provident society in the country) maintains a list of owners. The particular focus is on beneficial ownership: the individuals who ultimately own, and can benefit from, holding shares in the company, whether directly or indirectly.
Under these new rules, companies must share that information with the authorities in a central registry. In Ireland, that registry is maintained by the Companies Registration Office. Anyone can access the register online and obtain beneficial ownership information for a particular company for a small fee.
Even though all companies must provide their beneficial ownership information to the central registry by November 22, take-up, to date, has been low. Apparently, there are some 240,000 companies in this country. I have seen an estimate that, by last month, only one in eight of companies had registered their beneficial ownerships with the CRO.
Although there is still some time to go, 12% is not an ideal compliance rate, at this stage.
As of next year, financial intermediaries, like accountants, and financial institutions, such as banks, might not be allowed to provide services to companies that have not complied with their beneficial ownership register obligations.
Under the heads of a bill being proposed for introduction to the Oireachtas next year, such companies can be cut off from access to the banking, accounting, and advisory facilities they might need to carry out legitimate business in Ireland.
The small number of companies registering so far may be down to a lack of awareness of the law. Perhaps there is also a latent resistance to the idea.
Throwing open the business interests of people who may well have wished to keep their affairs concealed, or at least a little more private, will not sit well with everyone. It’s not all about targeting criminality.
There can be legitimate concerns on the part of shareholders, because of commercial sensitivity or, indeed, personal security. Only minors, those under 18, will not feature on the register.
However, the broader picture is that business transparency is a reputational asset. Like every other sphere of human activity, business requires regulation, even if that regulation appears increasingly onerous. Transparency is now becoming as important as confidentiality was in the past.