Never mind fake news, on Monday we had good news with an exciting milestone reached in the fight against corrupt money sloshing around the world, often stolen from the poorest countries and too often facilitated in the UK.
On the one year anniversary of the Panama Papers leak we had the launch of the OpenOwnership Register – the first attempt at a global public beneficial ownership register – so we know who really owns and controls companies and how they are connected across jurisdictions.
Why is it so important to know who owns companies?
Many billions of dollars are lost every year to illicit financial flows (IFFs) and the tax dodging schemes associated with them, with huge amounts stolen from the poorest countries.
A global web of shadowy companies and networks are being used to steal money that’s vital for public services – some amounts equal to entire national health budgets – by criminals based all over the world, and often enabled by lawyers, accountants, real estate agents and other middle-men in the UK.
Knowing who ultimately owns and controls companies allows law enforcement agencies to be able to track the flows of IFFs, investigate and prosecute criminals, and return stolen assets to their rightful owners.
How does misinvoicing come into it?
One use for shadowy companies is the ‘misinvoicing’ of international trade. This is the practice of hiding the true value of imports and exports, and shifting profits to dodge taxes.
$435 billion is lost due to ‘trade misinvoicing’ across the 75 countries where most of the world’s child and maternal mortality occurs. Save the Children estimates that this results in tax losses of $78 billion for these countries.
$15 billion is lost in tax revenue in sub-Saharan Africa alone from trade misinvoicing. To put that into context, that’s the equivalent cost of 1.8 million health workers in the region with the highest number of newborn deaths in the world.
Knowing who really owns companies is vital. It helps prevent the robbery of the world’s poorest people by allowing law enforcement to see the connections between countries and different ownership structures.
But what can we do?
Increasing transparency in financial systems allows critical information to be generated and assessed through mechanisms such as country-by-country reporting (which helps flag discrepancies between economic activity and the tax being paid by companies), and public beneficial ownership registries. These in turn allow the public to hold companies and governments to account in their financial dealings.
The OpenOwnership Register is a great example of civil society working together to fight corruption.
Leading transparency NGOs from around the world with funding from the UK Department of International Development (DFID) have come together to support OpenOwnership who have so far collated the details of 1.9 million companies across 26 countries.
The information has come from different national beneficial ownership registers and other sources of information – such as the Extractives Industry Transparency Initiative (EITI) – and companies that are self-reporting.
This is an exciting collaboration which has only just begun. It allows us to overcome the challenges of jurisdiction-bound registers and – in this global world – to see where corrupt money really goes.
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