Given the well-documented risks associated with anonymous companies, there’s no longer any serious question that governments should collect accurate information on companies’ “ultimate beneficial owners” (UBOs), and should make this information available to law enforcement and entities conducting due diligence.
The more controversial question is whether UBO information ought to be publicly available. Some jurisdictions, led by the United Kingdom, have already created public UBO registers, and the EU’s Fifth Anti-Money Laundering Directive calls on all EU members to establish such registers by January 2020. Other jurisdictions are likely to follow. Is this a good idea?
The answer is likely yes. While empirical evidence is limited, making UBO information public has at least three benefits:
First, public scrutiny of UBO registers makes it more likely that inaccurate entries will be caught and corrected. Furthermore, detecting and publicizing errors in the registers can reveal which jurisdictions are doing a poor job of ensuring the accuracy of the UBO information they collect, which helps put pressure on those jurisdictions to do a better job.
Second, journalists and civil society organizations can use public UBO registers to identify and investigate far more cases of potential malfeasance than can resource-constrained law enforcement agencies. Outside watchdogs can analyze public UBO data for red flags and can combine UBO information with other data sources—such as public procurement or campaign contribution data, sanctions lists, or social media. These efforts not only can prompt or support criminal investigations, but they can also help make more transparent worrisome practices that don’t involve clear evidence of illegality.
Third, public registers make it easier for those conducting investigations—in both the public and private sectors—to get UBO information without having to make a formal request to the government, which, notwithstanding promises of cooperation, can be cumbersome and time-consuming.
Critics have raised a number of objections to public UBO registers, but these objections are illusory, exaggerated, or easily addressed.
Some critics argue that public UBO registers are useless because criminals will lie. But that’s not an argument against publicity; it’s an argument against overreliance on self-disclosure. Companies, or their registration agents, should be required to provide verified identification documents for their UBOs, with stringent penalties for inaccurate disclosures. The government should perform regular audits. And, as noted above, transparency reduces the inaccuracy problem, provided these other measures are in place.
Critics have raised a number of objections to public UBO registers, but these objections are illusory, exaggerated, or easily addressed.
Critics also claim public UBO registers violate owners’ privacy rights and may threaten their safety. But in most cases there’s no compelling privacy interest in keeping basic ownership information secret. Jurisdictions already publish records of real property ownership, campaign contributions, and similar things; company ownership doesn’t seem any more sensitive. Furthermore, the identifying information included in public UBO registers can be limited to what’s necessary to identify the owner—with the additional information used for verification (like exact birthday or national ID number) available only to the government. While there may be exceptional circumstances in which disclosing even basic UBO information might endanger a company owner’s safety, this can easily be addressed through a narrow exemption for such cases. Indeed, most existing public UBO registers already include such an exemption, and there’s no evidence that this safeguard is insufficient. The handful of cases where there’s a legitimate reason to keep ownership hidden thus shouldn’t be made a pretext to derail the justified push for greater ownership transparency.
Public UBO registers are a not a panacea, but they make it harder to launder money and evade taxes and easier for citizens to know who’s doing business with whom. The move to establish such registers in all jurisdictions therefore ought to continue.
Matthew Stephenson is the Eli Goldston Professor of Law at Harvard Law School. His areas of expertise include anti-corruption, legislation, administrative law, and the political economy of public law.
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