Covid-19 Heightens Need For National Beneficial Ownership Register
That the ongoing COVID-19 pandemic will affect our lives in ways that we have yet to comprehend fully, has been widely accepted by now. So is the fact that the fallout won’t be experienced in the same way everywhere and by everyone. Pre-pandemic inequalities are only bound to become worse, further sharpening the social, political and economic differences between countries, individuals and businesses.
This scenario, like most situations of emergency and uncertainty, offers fertile ground for criminal activity.
Although fraud and corruption are not new phenomena, evidence from past crises shows that they will likely be intensified during the pandemic.
For example, in some countries there are already instances of contracts for personal protective equipment, hospital equipment, medical ventilators, face masks and health services being awarded to dubious companies.
In the main, we are talking about money laundering camouflaged as COVID-19 relief.
Also, in many countries, to mitigate the economic effects caused by COVID-19, governments continue to develop significant economic stimulus packages.
Paradoxically, however, they are also relaxing controls in order to urgently spend funds, further amplifying risks which can undermine the effectiveness and efficiency of such programmes.
At the same time, remote working, social isolation and changing working habits may delay the timely submission of suspicious activity reports, which facilitates the proliferation of such activities.
With significant funds being mobilised every day around the world to respond to the COVID-19 emergency, the need for economic resiliency and good governance imperatives is a priority now more than ever before.
“Increasing transparency in beneficial ownership, meaning publicly releasing the names of those who own or control businesses, should be one of those priorities.”
The benefits of increasing the transparency of beneficial ownership information are well documented.
Public beneficial ownership registers help shine a light on hidden corporate structures that can be exploited to launder the proceeds of corruption, hide conflicts of interest, improperly win lucrative government contracts, and evade tax payments.
In situations of emergency, such as the one we are experiencing, ownership transparency allows governments to quickly perform minimal standards of due diligence on the companies that they are buying goods and services from.
It also allows governments to know who is benefiting from the economic aid provided to companies and to target support where it’s most needed.
As companies with global supply chains are having to adjust to supply shortages, reduced or immobile workforces, poor oversight and weakened approval processes, and low productivity, opportunities for criminals amplify.
Disrupted supply chains mean that companies will most likely short-cut due diligence processes in order to continue to be profitable—a dangerous path to walk on.
Trinidad and Tobago is in election mode. But as a follow up to the recent encouraging moves undertaken by the Rowley government in ensuring transparency and accountability when it comes to the companies operating in the country, the next Attorney General must push for the establishment of a national public register of beneficial owners of all companies as a natural next step.
The Companies (Amendment) Act 2019 — which made beneficial ownership disclosure mandatory for all companies — and the subsequent decision by the Financial Action Task Force (FATF) to remove Trinidad and Tobago from its grey list of countries that were being monitored in relation to money laundering, terrorist financing and other related threats to the international financial system, are to be applauded.
By prioritising free, public beneficial ownership disclosure, the next AG will help keep Trinidad and Tobago off FATF blacklists and grey lists and the country will not run the risk of economic sanctions as well as other prohibitive measures by FATF member states and international organisations.
Still, more needs to be done particularly in the face of the COVID-19 pandemic and establishing a national, publicly available, register of beneficial owners can help the government in its efforts to boost economic recovery.
The country, after all, has been hit hard by the reduced demand of oil and gas since the coronavirus outbreak toppled global markets.
Transparency and accountability tools and practices, such as ownership disclosure, don’t only guard countries against corruption and mismanagement, they also encourage foreign investment.
Canada, Denmark and France, for instance, have refused financial support to companies based in tax havens.
In a time of extreme uncertainty and mistrust, increased transparency will ultimately help to restore public trust that the central government can demonstrate that taxpayers’ funds are being spent efficiently in response to the pandemic.
That’s a win-win for both the government and citizens.
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