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G7 reaches agreement on real beneficiaries of the companies

The Group of Seven (G7 –Germany, Canada, United States, France, Italy, Japan and United Kingdom-) reached an agreement on the beneficial owners of the companies

The following are related questions and answers:

  1. What has the G7 agreed?

G7 Finance Ministers agreed to implement and strengthen registries of company beneficial ownership information in their respective jurisdictions.

This is a major step forward in global efforts to tackle illicit finance and will also boost the UK’s work as G7 President to tackle environmental crimes – like the illegal wildlife trade and illegal logging.

  1. What is a company beneficial ownership registry?

A company beneficial ownership registry records who ultimately owns or controls a company – the ‘beneficial owner’.

Countries with these registries typically require companies incorporated in their jurisdiction to report their beneficial owners to a nominated government authority (Companies House in the UK) which maintains a repository of company ownership information (‘registry’).

The UK was one of the first countries in the world to introduce a public beneficial ownership registry in 2016 – the Persons of Significant Control Register maintained by Companies House – which has more than 5.1 million names of people with significant control over UK registered companies.

  1. How does this help tackle environmental crime?

Criminals regularly create complex company ownership structures, often involving anonymous shell companies, to launder their ill-gotten gains and to conceal their identities from law enforcement.

The Financial Action Task Force (FATF), the global anti-money laundering standard setter, has found that this lack of transparency is also being abused by those committing environmental crimes – which are impacting the planet’s biodiversity and generate hundreds of billions of dollars in illicit finance every year.

Information about the beneficial owner of a company helps law enforcement trace illicit financial flows and pursue criminals, but it can often be difficult to locate.

Company beneficial ownership registries provide law enforcement with direct, rapid access to a database of the beneficial owners of all companies in a jurisdiction, helping them to ‘unmask’ beneficial owners and bring criminals to justice.

  1. Has the information in Companies House helped prevent illegal wildlife trafficking?

Yes, for example, co-operation between UK and European authorities recently led to the conviction of a glass eel trafficker with alleged proceeds of over GBP 53 million.

UK Border Force seized a consignment of glass eels – the most trafficked protected species in Europe – which Mr K. was trying to export to Hong Kong, despite it being illegal to sell them beyond Europe.

The National Crime Agency (NCA) found a link between the named recipient of the consignment and a company called ICE Ltd, and information held by Companies House showed that Mr. K owned 80% of ICE Ltd.

Financial investigators used invoices sent to Mr. K’s affiliated companies and his personal and business bank account records to establish the payment flows between different entities – including wire transfers to the barn that was holding the eels in the UK and firms that were shipping the eels to South East Asia, large payments from several companies in South East Asia and cash withdrawals from ICE Ltd after these payments.

The NCA established that Mr. K was trafficking the protected species using ICE Ltd for over two years, selling over 1,775 kilograms of eels with estimated value of GBP 53 million at the point of sale.

The Crown Prosecution Service proved that Mr. K controlled this trafficking operation and he was convicted of the illegal importation and movement of protected species.

  1. What about other crimes?

Criminals involved in corruption, human trafficking, terrorist financing and other serious threats are also using front companies and shell companies to enable their illicit activity. Company registries also protect our economies from these threats.

  1. What is the UK doing to strengthen its registry?

The UK, and the EU states in the G7, have implemented public beneficial ownership registries. The US and Canada have also recently announced plans for beneficial ownership registries in their jurisdictions.

All European G7 members are committing to strengthen their existing beneficial ownership registers.

The UK recently announced its intention to legislate for a set of significant reforms to Companies House, including giving it greater powers to challenge the information submitted, and requiring identity verification for people who manage, control or set up companies.

The UK also intends to create a new public register of overseas entities who own UK real estate. Legislation to enable these reforms will be brought forward as soon as parliamentary time allows.

 

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