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Panama Papers: has transparency improved a year on?

James Swenson
Global Head of Proposition for Risk Managed Services (RMS)

A year since the Panama Papers data leak sparked worldwide controversy around the use of offshore companies, has transparency increased and is it any easier for compliance officers to identify Ultimate Beneficial Owners (UBOs)?

Following the release of the Panama Papers one year ago, we undertook an informal survey of company registries and tax offices in more than 230 jurisdictions where companies can be incorporated to assess the level of transparency regarding shareholders and directors.

The results were overwhelmingly disappointing:

  • Only 58% of all jurisdictions had registries with an online searchable function where company details could be retrieved.
  • An additional 20% of all jurisdictions offered registry searches “offline,” i.e. either in-person, in writing, or via authorized agents.
  • Of the 78% of all jurisdictions that offered either an online or offline registry search, only 45% provided details of registered directors and only an astonishing 36% provided first level shareholding information.

Not surprisingly, at the time of the survey, the Panamanian Public Registry (Registro Público de Panamá) offered only details on directors, not shareholders.

Despite public outcry over the last year and international pressure, the situation in Panama has not changed.

Is the picture becoming clearer?

One year on, we revisited the survey to analyze what improvements, if any, had emerged given the enormous international pressure on transparency.

We have identified new corporate registry databases in eight jurisdictions: Burkina Faso, Cambodia, Cote d’Ivoire, the Democratic Republic of Congo (DRC), Guinea, Nigeria, the Seychelles, and Sudan.

Panama Papers
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The majority of databases do not include shareholder or director information, and provide limited registration details (company number, status, and/or registered address).

Only the DRC offers some data on shareholders and managers, but this is not comprehensive.

In jurisdictions like Guinea and Cambodia, the registration details are limited to companies registered since the online registry launched and no historical data is available.

The Seychelles previously provided registration details on request (offline) but has now transitioned to an online search function.

Successes and failures

We have also identified additional progress in the availability of registry information across Africa, mainly via in-person, offline retrieval methods.

Company information, including shareholding and directors, is now increasingly available in Equatorial Guinea, Eritrea, and Mauritania.

However, response times, availability of details on all companies and the accuracy of information are unpredictable.

The Liberia Business Registry, online search facility, has gone cold, with no explanation given for the unavailability of the site. Our attempts to contact the registry have been unsuccessful.

For due diligence practitioners, these developments are significant.

Africa and the Middle East are notoriously challenging jurisdictions for accessing official, public records on corporate entities, however, the details provided are insufficient for conducting proper due diligence.

Pillar of compliance

Identification of ultimate beneficial owners is a central pillar of any compliance programme whether focused on anti-money laundering due diligence for client onboarding or anti-bribery screening on third parties such as suppliers and distributors.

Enhanced Due Diligence Research: Difficult Places To Find Information
Enhanced Due Diligence Research: Difficult Places To Find Information

Unless the UBO information is requested during the onboarding process, the current state of transparency makes identifying beneficial ownership extremely challenging.

Even in the countries where shareholding information is available, there are additional challenges in identifying UBOs. For example, some registries may limit shareholding information to certain company types.

A more common scenario is that the first-level shareholder is a corporate entity, which then needs to be further unwrapped until individuals are identified.

Where do we stand today?

Our survey of registry availability indicates some superficial improvement in transparency, but mainly around the availability of online verification, not shareholding data:

  • Jurisdictions with some sort of online registry verification increased to 83% from 78%
  • Jurisdictions with availability of shareholding information via an online registry verification increased to 39% from 36%
  • Jurisdictions with availability of directors or managers via an online registry verification increased to 48% from 45%

Hurdles to overcome

Scheduled well ahead of the release of the Panama Papers, the International Anti-Corruption Conference (IACC) was held in Panama City at the end of 2016.

Unsurprisingly, the Panama Papers, transparency, ultimate beneficial ownership and the role of offshore jurisdictions in international finance were high on the agenda.

Panama Papers
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Consensus amongst most delegates gravitated toward the need for increased transparency around company ownership and progress toward universal registries of ultimate beneficial ownership.

Along with the B-Team, Bank of Montreal, and Deloitte, we have launched the Open Transparency website at the IACC in Panama.

The aim of the initiative is to engage business in discussions on how to practically implement beneficial ownership transparency.

While consensus is an important milestone in achieving greater transparency, practical progress has been slow.

For example, when pressed at a session highlighting Panama’s response to the Panama Papers at the AICC about plans to increase transparency in the public registry, government officials cited public security concerns for directors and shareholders as one of the primary motivators for concealing this data.

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