Public registers of beneficial ownership raise privacy issues that need to be balanced against the benefits of greater corporate transparency, argues Ian Guider
This article was first published in the June 2018 Ireland edition of Accounting and Business magazine.
A number of months ago I wrote about the latest embarrassing leaks to emerge from a law firm in the sunny Caribbean where we learned of the extraordinary lengths some wealthy and well-known names go to in order to avoid paying tax. Many of these shell companies, trusts, partnerships and various schemes were set up so that their ultimate owners simply didn’t have to disclose what was going on – even if pretty much all of the details to emerge from the Paradise Papers were perfectly legal.
That veil of secrecy is something many prize. It’s also a lucrative business for all of the advisory firms involved. However, under EU anti-money laundering rules due to come into effect in the next couple of years (unless watered down in the meantime) there will be sweeping changes around disclosure in the near future.
For a couple of years now I’ve heard a number of concerns voiced by various groups about proposals for widening access to registers of beneficial ownership.
Some believe that it’s going to be a costly burden for companies to maintain these registers and update them; others that it’s an unnecessary burden; and some just don’t want what they say is an invasion of privacy if everyone could look up all sorts of personal information. I’ve been told by a number of legal advisers that the prospect of public access to registers in Ireland has prevented deals going ahead because some clients don’t want their involvement in projects disclosed.
Contrast private company, trusts and partnership requirements with stock market rules. If you are a shareholder in a public company you must disclose your interest once it exceeds a certain threshold. Those rules are there for very good reasons – so that share prices in a plc cannot be manipulated. Strengthening investor protection has been a good thing.
So why not extend transparency rules? Maintaining a register and not widening the access makes little sense. If it is to be kept limited to regulatory bodies and enforcement agencies, what was the point of creating a register? Many of these bodies would be able to secure information in different ways, although centralising it speeds up the process.
One legal adviser pointed out to me that culturally on this side of the world dissemination of information doesn’t sit well with some people. One body that lobbied the Irish state on the matter warned of dire consequences from public access, with threats to individuals of blackmail and even physical danger. Some won’t like the media prying into their affairs – and you can be pretty sure the media will be launching investigations.
But I’m yet to be sold on the notion the sky will fall in. For a start, I’m not sure that some of the arguments stack up. Of course there will be a cost, there always is with regulation. But on the whole transparency is a good thing. If we’re to learn from scandals of the past it’s right that access to information is shared widely.
Ian Guider is markets editor of The Sunday Business Post
"I’m yet to be sold on the notion the sky will fall in. For a start, I’m not sure that some of the arguments stack up"