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Open beneficial ownership registers will scatter the criminals and their assets

Transparency International and over 100 other organizations released an open letter calling on governments to open up company and beneficial ownership registers as a matter of urgency, to assist in the implementation of sanctions against Russian oligarchs. While I share the world’s abhorrence toward Russia’s actions, I have long-resisted calls for open public registers of ultimate beneficial owner (UBO) information, and I still do.

At first blush, it seems difficult to argue against open beneficial ownership registers, especially in the context of the Russian invasion of Ukraine. However, I maintain that any perceived advantages need to be offset in the context of the assault on individual privacy and the negligible impact that I believe open registers will have.

Before going further, my full disclosure. I am not unaffected by the situation in Ukraine, as my wife is Ukrainian and her immediate family is in Ukraine, in great danger, even as I type. Also, I have spent 30+ years tracing and recovering assets stolen by economic criminals and I know it is difficult, especially now, to resist calls for greater transparency.

For example, NGOs and journalists will claim that their crime fighting roles have been frustrated by the lack of open public UBO registers. Some, like the FT’s Tom Burgis, have had to endure significant legal travails for publishing the results of their investigations. But given the enormous scrutiny that oligarchs have come under, including from law enforcement agencies who can readily exchange information without the hinderance that afflict NGOs and journalists, their successes remain constrained.

Is the lack of open company registers the problem here… or something much simpler?

My experience suggests that opening up UBO registers will simply encourage bad actors to become ever craftier and more adept at covering their tracks. They wouldn’t sign their names to KYC documents or use  family members to hide their UBO information.

I readily accept that these oligarchs use “networks of shell companies” to cover their tracks, but can someone explain how such networks – which have successfully thwarted the largest and best-equipped law enforcement agencies for years – will suddenly collapse because a reporter armed with Google and a laptop has access to open UBO registers?

I also accept that the recent campaigners’ demands are honorable and ethically motivated, with a goal to root out corruption and bring criminals to justice. But as we have learned from various exposés – the Panama, Paradise and Pandora Papers leaks, for example – some journalists identify not necessarily just wrongdoers but others who may be rich, famous, or in the public eye, and proceed to “out” them.

So yes, the situation in Ukraine is deeply upsetting. If I thought that open company registers would assist in tracing and sequestering assets belonging to the lawbreakers, I would move heaven and earth to support the calls that are currently being made for their introduction.

But I have consistently called into question the effectiveness of open registers to resolve the issues they seek to address, and the unwarranted intrusiveness on the privacy of innocent individuals who play by the rules.

Of course, being able to point to the success of countries which have plucked low-hanging-fruit – such as yachts, mansions, and soccer teams – from oligarchs is all well and good. But the vast wealth that these individuals enjoy will limit the impact of such asset freezing orders.

Open UBO registers will be ineffective in the context of the Russian invasion of Ukraine and the sanctioning of oligarchs for all the reasons I have outlined above. We will merely make them more wary and effective in covering their tracks. Worse, we will destroy the investigative value reposed in “closed” UBO registers because once “open,” the criminals will scatter and so will their assets.

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With thanks to Tony McClements, Senior Investigator at Martin Kenney & Co, for his assistance with this post. He served for 33 years with UK police forces and has specialized in Fraud & Financial Investigation since 1998. He is also a lecturer in these subjects at the University of Central Lancashire (UCLAN).

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