As one of the last signatories in Europe to the UN Convention Against Corruption and sitting in 8th place on the 2015 Financial Secrecy Index, the German government has a chequered commitment to anti-corruption.
In 2017 Germany has a chance to make a change and become a leader in the anti-corruption field as it passes into law regulations on a beneficial ownership registry, required under the EU’s 4th money-laundering directive. The warning signs are though that Germany will again take the route of allowing corruption to take place unhindered.
What is beneficial ownership registration?
Beneficial ownership refers to persons or companies holding a stake or voting rights over a company or trust, without being named as the legal owners of the company, enabling the true owner to hide their identity. A beneficial ownership requirement forces companies and trusts to disclose who are the true owners of the company or trust.
Open beneficial ownership information enables:
- easy access by tax officials and law enforcement inspectors domestically and abroad to key information
- businesses to know who they are doing business with
- citizens to know who is ultimately providing their services.
From an asset recovery perspective, it is vital to know who the beneficial owners are, as corrupt public officials frequently hide behind legal owners to avoid the public knowing that they have a beneficial stake in a company. It is a means used to launder and hide stolen public funds.
What are the global standards?
Globally, the push is for a commitment to open data and a low threshold of ownership for companies to report on beneficial owners.
Open data means that data and content can be freely used, modified, and shared by anyone for any purpose. The UK’s beneficial ownership register is open data, allowing the bulk download of information. This has been used by civil society to identify areas where public oversight bodies should take a further look.
The threshold is the limit that rules set for how much a person should control of a company in terms of shares or voting rights, before they have to be identified publicly. The EU directive sets this at 25%, which is the standard the UK implemented. This has led to problems though, with 10% of companies in the UK so far not reporting a beneficial owner, as each beneficial owner controls less than 25%.
Germany as a corruption enabler?
Despite the movement towards open data and the need for low thresholds, it appears that against early positive signs, Germany is moving towards establishing register that is not public, not open data compatible and has a high 25% threshold for disclosure. According to reports, the Cabinet will pass a proposed law that limits searches to persons with legitimate interests, meaning the public will not be able to access them, charges a fee for searching and is only searchable by company name, not individual.
In 2017 Germany and only a few months since the Panama Papers scandal, Germany should be at the forefront of international efforts on openness and transparency. Instead, are we going to see Germany once again lagging behind?
Read our new report on beneficial ownership here.
“Foto: Tobias Koch”.