There is some great news! Today, a bank holiday in the UK, the UK government has announced that it is sending company secrecy on a permanent holiday, by requiring that the identities of those who own or control UK companies be publicly disclosed. With this landmark decision, the UK will become the world’s first country to require this level of transparency over company ownership.
Why is this so significant? In short, this could be a game changer in the fight against corruption involving the use of anonymous shell companies, or “phantom firms”. These secretive firms are commonly used by corrupt individuals and businesses to launder money linked to corruption, illegal weapons trading, drug and human trafficking, and tax evasion.
Developing countries are the victims of much of this abuse. The Nigerian dictator Sani Abacha used phantom firms to help steal as much as $5 billion from his country during his disastrous 5-year reign in the 1990s. The son of Equatorial Guinea’s president Teodoro Obiang used phantom firms to help spend some of the $100+ million that the US government alleges he laundered into the US. Between 2010 and 2012, phantom firms played a starring role in five highly dubious mining deals that swindled the impoverished people of the Democratic Republic of Congo out of more than $1 billion.
These are just a few of the many examples in which phantom firms have been used to siphon money out of developing countries that could have been used to finance improvements in health and education instead of lining the pockets of corrupt politicians and businessmen.
That is why today’s announcement by the UK government is so important. It could mark the beginning of the end for phantom firms. But for that to become a reality, much remains to be done. Every country – not just one – must abolish phantom firms; otherwise, phantom firms will always find a place to hide and can continue to be used to siphon money from developing countries.
Countries – including the UK – must also muster the political will to address the abuse of trusts and similar legal instruments. Without comparable rules covering trusts, a massive loophole will be created. It’s like closing the door to corruption while leaving a window wide open.
The 28 member states of the European Union have a golden opportunity to crack down on phantom firms. The EU is currently revising its Anti-Money Laundering Directive. As part of that process, last month the European Parliament approved a position that would make information about who owns and controls companies, trusts and similar legal instruments publicly available. EU member states should support and finalize that position at the EU to help ensure that phantom firms have no remaining place to hide or loophole to exploit.
ONE’s members have been incredible advocates in the fight against phantom firms. More than 100 ONE members submitted their own views as part of the UK government’s public consultation on phantom firms. Nearly 75,000 people have signed ONE’s petition that calls on European leaders to pass robust transparency rules on company and trust ownership as part of the EU Anti-Money Laundering Directive currently under negotiation in Brussels. This support has been instrumental in getting government officials to take action on this issue.