On Beneficial Ownership Registers and Privacy
The debate over the efficacy and legitimacy of Beneficial Ownership Registers is heated, and several different arguments have been made against the collection and publication of such information both in Trinidad and Tobago and internationally.
One of the main objections has to do with the issue of privacy and whether or not publishing data about company owners interferes with individuals’ rights to privacy. In order to understand the legitimacy of this argument, we need to understand what privacy is and whether the establishment of Beneficial Ownership Registers qualifies as a threat to its fulfilment.
Under international human rights law, privacy is closely related to concepts of autonomy and human dignity. It empowers individuals to make decisions free from the influence or interference of public and private actors.
A violation only arises if the interference with privacy lacks a legitimate justification. In turn, an interference with privacy is justified if it’s considered lawful, necessary to advance a legitimate aim, and if the degree of interference is proportionate to the legitimate end sought.
Based on various data protection regimes internationally, the processing of personal data is considered lawful if it’s necessary for compliance with a legal obligation.
By definition, if a country adopts a law requiring legal entities to provide beneficial ownership information, then this condition is automatically satisfied.
This situation already exists in the UK, which was one of the first countries to create a national beneficial ownership register back in 2016, and is already applicable in Trinidad and Tobago, where the concept of beneficial ownership was recently introduced, with the Parliament amending the 1995 Companies Act.
The fact that interference with privacy is legally authorised, however, does not automatically mean that it’s legitimate and necessary.
Here, the counterargument to the establishment of Beneficial Ownership Registers is that they don’t need to be public in order to be effective, and that government-only registers could serve the same purpose without the need to disclose personal information to the general public.
While the adoption of public registers across the world is still in its early stages, evidence shows that public registers, as opposed to private ones, allow for greater oversight by civil society and the public, leveraging local knowledge and more sets of eyes to identify errors and red flags.
In November 2016, for example, Global Witness, DataKind UK, OpenCorporates, Spend Network and OCCRP worked with 30 volunteer data scientists to undertake an initial analysis of the first 1.3 million companies that had submitted ownership data to the UK registry.
The analysis allowed these organisations to identify almost 3,000 companies that had listed their beneficial owners as companies with addresses in tax havens. In the case of the UK public company registry, the UK’s Companies House confirmed that within the first six months they were following up on multiple contacts from the public highlighting inaccuracies in the data.
Concerns however, are raised about the perceived risks associated with publicly publishing information about who owns and controls companies, including kidnapping, identity theft, blackmailing or government interference.
In Trinidad and Tobago, for instance, small and medium-sized mining companies have flagged security concerns associated with releasing information about their public owners. In recent times, reports of illegal quarries and crime linked to these enterprises have also been in the public eye.
These concerns are valid and amplified in particular contexts, such as living under authoritarian regimes, or in relation to specific, potentially sensitive data, like someone’s religious belief or sexual orientation. This is where proportionality comes into play.
Even if public registers were lawful and effective, the interference with privacy still needs to be proportionate to the legitimate public policy end. Proportionality can be achieved by ensuring the use of various safeguards, limitations, and exceptions.
All reasonable public register regimes must limit the information collected and disclosed to what is necessary to identify the true beneficial owners. A carefully designed and narrowly defined exemption process should exist to allow those with legitimate security or privacy concerns to request that their details aren’t published in the public domain. Such applications could be verified and judged by an independent body.
Aside from privacy concerns, another argument often raised against the efficacy of public Beneficial Ownership Registers is related to the accuracy of the information provided by companies that list their beneficial ownership data.
While this is certainly a valid argument, there are plenty of measures that can be taken to check the information that is being submitted. Requiring the submission of proof of identity is one of them, and it would easily demonstrate whether the registered beneficial owner is an actual existing person.
Denmark already requires beneficial owners to submit a scanned copy of their passport or other national ID, limiting the possibilities for false registrations. This is a reasonable request, given that proof of identity is also needed when opening a bank account.
Requiring the submission of documents proving ownership or control of the company is another way to verify information. This could include proof of shareholding through a company’s confirmation statement or voting rights set out in its articles of association.
Cross-checking data with other government data-sets or even with public registers of other countries could also weed out inconsistencies. Imagine the Board of Inland Revenue teaming up with the Registrar General and the FBI to investigate a tax discrepancy linked to a wrongful BO declaration.
Greater transparency in this sense, has also proven effective in increasing foreign investments and competitiveness.
Anonymous shell companies that are often linked to criminal or illicit activities undermine trust in companies and discourage investment. Countries such as Liberia, Ghana and Guinea, as an example, have been getting significant investment after making their contracts public.
In the fight against criminal activity linked to beneficial ownership opaqueness, Beneficial Ownership Registers have been proven to be a powerful tool.
While concerns over privacy, further criminal activities and the efficacy itself of public registers must not be easily disregarded, they shouldn't be considered deterrents to their establishment.
The balance between transparency and individuals' rights to privacy and well-being is an important one to keep, but public Beneficial Ownership Registers are not a threat, and their establishment continues to be a matter of public interest, both in Trinidad and Tobago and at the international level.
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