The role of registries in finding the elusive beneficial owner

Corporate Registers Forum 2011 10 May 2011

The Misuse of Corporate Vehicles Project

The issue: Beneficial Ownership

Who is the beneficial owner (BO)? Natural person who ultimately owns or controls a corporate vehicle

(CV) or legal entity, e.g. company, foundation, trust

What’s the problem? Obstacle to investigators: Establishing true ownership/ control of

proceeds of corruption moved through/ concealed by legal entities

The Misuse of Corporate Vehicles Project How legal entities are used to conceal the interest of a corrupt official

in the proceeds of corruption

Database of 150 Grand Corruption Cases

Registry Project in 40 Jurisdictions

Identify solutions - role registries and service providers could play in gathering information on beneficial owners

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The Registry Project3

Project Assessing registries’ role in providing information on legal

entities and collecting beneficial ownership

To do this, answer 4 questions

- What information is collected?

- Is that information verified for accuracy?

- Is that information updated?

- Is that information accessible in a timely manner?

Method 40 countries: legislative assessment as database

Country report on findings sent to registries

Brief questionnaire on day-to-day practices and challenges

Key Findings

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General Findings

Registries do not have AML objective

Starting point for law enforcement; cross checking tool for banks- easiest to access

Most registries are passive in nature

Amount of information varies

Do not cover unincorporated entities such as trusts

Only Jersey requires the BO to be identified and recorded by a government body

Almost all registries record relevant information on entities, enhancing the utility of the registry in possibly providing leads to the beneficial owner.

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What information is collected?6

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Is information verified for accuracy and updated?

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Capacity and resources Beneficial ownership in the registry = significant change in

approach and funding to ensure accuracy, enforcement of compliance, and correct identification of the beneficial owner

Financial constraints are already of major concern to most

Is information verified for accuracy and updated?

The Jersey model: Conditions under which registry can be an option for collecting beneficial ownership

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Condition 1: The registry verifies information in some way

Condition 2: The registry enforces compliance with registration and updating requirements when information changes

Condition 3: The registry is knowledgeable on the concept of beneficial ownership and how to identify BO in a complex corporate structure; otherwise implement a simplified definition of beneficial owner (focusing on percentage shareholding or largest controlling interest)

Is information accessiblein a timely manner?

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•Preference for using online registry databases

•Possible to have search criteria for each type of information the registry collects

Is information accessible in atimely manner?

Access can and is being improved improve efficiency in receiving and retrieving information

facilitate timely disclosure

allow for instantaneous incorporations

Critical to role of registry in AML efforts

Overall promotion of timelier access through innovative features UK: disqualified directors search

Hong Kong: directors index

Singapore: information sharing & financial reporting

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Lessons from Findings12

Providing information Not beneficial ownership, but other useful leads

Balance between integrity and cost

Online registries with multiple search criteria critical to role in AML efforts

Collecting beneficial ownership Change in approach and funding

Would need to verify information in some way

Enforces compliance with updating requirements

Knowledgeable on the concept of beneficial ownership and how to identify that person

Principal Recommendations

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Registry Recommendation 1:Certain basic information should be maintained

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Entity name

Incorporation / formation / registration date

Entity type

Entity status

Address of the principal place of business

Address of the registered office and / or the name and address of the registered agent

Information on directors or managers and officers

• History of document filings

• Required annual returns

• PDF copies of filings and documents associated with the company (where feasible)

Registry Recommendation 2:Where feasible, encourage transition of registry from passive data receptors to more active components of countries’ AML regimes

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More resources

implementation of a robust on-going fact-checking component

investigators would have access to higher quality data from the outset, as they currently often have to rely on outdated information

Registry Recommendation 3:Technological investments should be made in registry systems

Registry as an AML tool is directly tied to the extent to which is it planned and upgraded for that purpose

o computerized > paper-based

o online capable > closed network

Desirable from both a business-friendliness and an AML perspective

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Registry Recommendation 4: The ability to search a registry is most useful for AML purposes when certain universal inquiries are easily accomplished

by natural persons by first name or last name (which results in their related addresses, files, company positions (e.g. director), and details of those companies)

by company secretary, registered office and/or agent

by shareholders

by addresses

by business activity

by country of registration

by date of registration

by date of incorporation

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Registry Recommendation 5: Countries should assign unique identifiers to legal entities incorporated within their jurisdiction

Collection of evidence within the jurisdiction from different domestic agencies (e.g. tax, licensing, municipal authorities)

Relevant to operational entities

May be further applicable to all CVs with presence in the jurisdiction (including foreign corporate vehicles that may only have an operational connection or be administered from there)

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T a s k T e a m L e a d e r o f T h e S t A R M i s u s e o f C o r p o r a t e V e h i c l e s P r o j e c t :

E m i l e v a n d e r D o e s d e W i l l e b o i s

T e l : + 1 . 2 0 2 . 4 5 8 . 8 6 7 9F a x : + 1 . 2 0 2 . 5 2 2 . 2 4 3 3

E m a i l : e v a n d e r d o e s @ w o r l d b a n k . o r g

Contact Information19