OGN Publications 4th April 2016

OGN submission: Make company ownership transparent

Submission to the government’s consultation on ‘Enhancing transparency of beneficial ownership information of foreign companies’.

All companies that own property or participate in public contracts should disclose as open data who controls and benefits from their business decisions.

Corruption thrives under conditions of secrecy.  When corrupt individuals and other criminals obtain illicit funds, they seek out ways to disguise the illegal origin of the money and to store the value somewhere secure. This means that all manner of investments can be used to launder the proceeds of corruption. Through this laundering process, illegally acquired wealth, such as bribes, kick-backs, illicit political contributions, embezzled funds and fake loans – as well as the proceeds of trafficking, frauds and tax evasion – are given an appearance of legitimacy. The assets can then be enjoyed by the corrupt or further moved on for other legal or illegal purposes.

The UK is an attractive location to launder, hide or enjoy the proceeds of corruption from around the world. The individuals who perpetrate these crimes are often engaged in grand corruption – corruption that pervades the highest levels of a national government and leads to a broad erosion of confidence in good governance, the rule of law and economic stability and enables the theft of very large amounts of wealth.

Much high-value property is owned by company vehicles registered in secrecy jurisdictions, not named individuals.  This is a proven means of hiding corrupt assets, which is linked directly to opaque foreign companies, rather than all foreign companies.  Research by Transparency International UK has found that:

  • 75% of properties whose owners are under investigation for corruption made use of offshore corporate secrecy to hide their identities
  • £180m+ worth of property in UK have been brought under criminal investigation as the suspected proceeds of corruption since 2004. This is believed to be only the tip of the iceberg of the scale of proceeds of corruption invested in UK property. Over 75% of the properties under criminal investigation use offshore corporate secrecy
  • The average price of a property under criminal investigation in the UK is £1.5m. The minimum is £130,000, the maximum is £9m and the median is £910,000. 48% of properties investigated were valued at over £1m
  • 36,342 London properties totalling 2.25 sq miles are held by offshore haven companies. Of these, 38% in the British Virgin Islands, 16% in Jersey, 9.5% in Isle of Man, and 9% in Guernsey
  • Almost one in ten properties in the City of Westminster (9.3 per cent), 7.3 per cent of properties in Kensington & Chelsea, and 4.5 per cent in the City of London are owned by companies registered in an offshore secrecy jurisdiction.
  • In 2011 alone £3.8bn worth of UK property was bought by British Virgin Islands–registered companies

The UK led the world in 2013 on beneficial ownership transparency through its commitment to an open register in the 2013-15 Open Government Partnership National Action Plan. As a result, from 2016 UK-registered companies can no longer hide their beneficial owners.

Despite this important reform, corrupt money will continue to flow undetected into the UK through foreign-owned companies, which can continue to own property or deliver public contracts without declaring who the owner is.

This year, the UK Open Government Network is calling on government to use the opportunity of the Prime Minister’s Anti-Corruption Summit and the UK’s 2016-18 Open Government Partnership National Action Plan to commit to:

“Ensure that all companies that own property or participate in delivering government obligations to provide public, goods, services and infrastructure will disclose who controls and benefits from their business decisions as open data.”

HMG should extend requirements to disclose beneficial ownership as open data in the following areas:

  • The ultimate beneficial ownership information of UK properties owned by overseas companies.
  • All companies that participate in the delivery of public goods, services and infrastructure in the UK or overseas.
  • Companies that bid for UK public contracts, including any sub-contractors or suppliers relevant to the contract.

In addition, the Government needs to bring to bear the power and influence it has to ensure implementation of a public beneficial ownership regime in the Overseas Territories and Crown Dependencies.  The release of the “Panama Papers” further reinforces the existing evidence that a cadre of corrupt politicians, public officials and business people are exploiting loopholes in the global financial system to launder and protect their illicit wealth. The upcoming Prime Minister’s Anti-Corruption Summit and 2016-18 UK Open Government Partnership National Action Plan present an important opportunity to address these issues.

Open Government Network members, including Global Witness, OpenCorporates and Transparency International UK, have made detailed submissions to the consultation, which we support.

This submission is made by the UK Open Government Civil Society Network – a coalition of active citizens and civil society organisations committed to making government work better for people through enhanced transparency, participation and accountability.  It is signed by:

Alexandra Runswick, Unlock Democracy
Colm Burns, Northern Ireland Open Government Network
David Banisar, ARTICLE 19
Dr Andy Williamson, Democratise
Professor Richard Murphy, City University, London
Rachel Davies, Transparency International UK
Rupert Simons, Publish What You Fund
Shauna Leven, Global Witness
Tim Davies, Practical Participation
Tim Hughes, UK Open Government Network coordinator