Cyprus, Ghana and Kenya Join Growing List of Countries to Create Beneficial Ownership Registers


An infamous tax haven in the heart of Europe and two of Africa’s largest economies will force businesses to declare their owners, joining a growing list of countries responding to public pressure on crime and tax evasion permitted by anonymous company vehicles.

Cyprus, Ghana and Kenya have finalized “beneficial ownership registers” which require local businesses to report owners to national authorities. Law enforcement, transparency activists and tax inspectors have long recognized the value of such disclosures in deterring criminals and corrupt officials.

Driven in part by scandals such as the 2016 Panama Papers investigation by the International Consortium of Investigative Journalists, more countries have enacted laws to create such registers or have signaled their intention to do so.

The progress has been “considerable,” according to a 2020 review by the Tax Justice Network. In February 2020, 81 countries approved laws requiring property information to be registered with national governments – more than double the number two years earlier.

In January, the United States Congress passed the Corporate Transparency Act, which requires business owners to identify themselves with the Department of the Treasury. American corporations, especially limited liability companies, have a long history of abuse by foreign fraudsters and kleptocrats.

“Publications like the Panama Papers or the Paradise Papers have raised international awareness of how individuals take advantage and even abuse opportunities for tax evasion or fraud, through complex networks of offshore legal structures, but very opaque, ”said Idriss Linge, a Cameroonian finance company. journalist and researcher. “The fact that the debate is internationalizing creates a snowball effect.”

Last month, Cyprus announced its intention to introduce its property register, a condition for the Mediterranean island’s membership in the European Union.

The move was greeted warmly by anti-corruption activists, especially in Russia and other countries of the former Soviet Union. Cyprus has long been a favorite destination for Russian money – dirty and clean – thanks to a generous tax treaty between countries and weak Cypriot laws and enforcement. In 2019, the global anti-money laundering watchdog, the Financial Action Task Force, reprimanded Cyprus for its ‘major shortcomings’, including a poor track record in tracing the proceeds of crime generated. outside the island. Authorities failed to proactively track and freeze corrupt foreign money, according to the report.

As part of the ICIJ’s Panama Papers investigation, journalists revealed how Cyprus played a central role in suspicious money movements linked to a friend of Russian President Vladimir Putin.

“I think it’s tricky,” Panama-based lawyer Jurgen Mossack emailed colleagues at the time about a $ 103 million deal going through Cyprus. Mossack was a co-founder of the law firm Mossack Fonseca, whose leaked files formed the basis of the Panama Papers investigation. He was concerned that “we may witness payments of questionable origin and purpose,” according to the email.

Experts told Reuters in January that the new register could cause business owners to flee Cyprus and set up businesses in countries that do not have ownership declaration requirements.

The contents of the registry will not be accessible to the public, however, frustrating advocates who argue that public information helps banks, researchers, policymakers and journalists.

In Ghana, the authorities finalized a property register earlier this month. Under the West African Nation’s new rules, each company must provide the Registrar General’s department with verified identities of each person behind each company.

“Following the publication of the Panama Papers and global efforts to address issues related to the fight against corruption and tax evasion, the Ghanaian government has come under pressure to act on beneficial ownership disclosure,” Registrar General Jemima Oware said explaining the impetus behind the law.

Rich in gold, oil, timber and other natural resources, Ghana loses more than $ 1 billion each year in obscure trade deals, according to an analysis by Global Financial Integrity.

“The beneficial ownership registry is important because it has the potential to unearth the intertwined relationships between business entities and their shareholders, thereby reducing opacity and instead ensuring transparency,” the Accra-based tax lawyer told ICIJ, Abdallah Ali-Nakyea. “Once the flow of funds can be traced and tracked, illicit financial flows will be reduced, if not completely eliminated.”

Across the continent, public and private companies in Kenya have until July to provide details of who owns more than 10% of locally registered businesses. Details will be shared with the Kenya tax office and other government departments to help track illicit wealth. Kenya’s parliament has also ordered the country’s tax office to hire more than 2,000 new staff to track down tax evaders, according to reports.

Francis Kairu, a Nairobi-based lawyer and researcher on illicit financial flows, told ICIJ that Kenya’s new registry will help the country’s tax office and asset recovery agency “keep track of major actors behind companies that engage in aggressive tax evasion schemes ”. The registry will also help link those suspected of crimes with assets purchased through limited liability companies, he said.

Kenya’s registry, like those of Cyprus and Ghana, will not be made public despite pressure from activists for transparency.

In general, Kairu said, “registries create an environment of greater transparency and remove opacity.” In the case of Kenya, Kairu said, “I think in the long run this will significantly discourage the use of registered Kenyan companies for the purposes of tax evasion, illicit wealth concealment and money laundering.”

Last week, Canada signaled it could be the next to join the club, releasing a long-awaited report on the possibility of a centralized and publicly accessible registry.

Loopholes in Canadian laws make it easier to set up shell companies and hide the identity of owners, according to a series of reports that coined the term “snow wash” to describe the combination of Canada’s cool weather and its lax approach to put an end to money laundering.

Transparency International welcomed the government’s report, but expressed concern that fears about the data released were “too cautious and jeopardized Canada’s chances of deterring dirty money.”

Update April 20, 2021: This week, the Government of Canada released its 2021 Budget, which proposed resources to implement a publicly available beneficial ownership registry by 2025.

“Tax evasion and money laundering costs the Canadian economy billions every year,” Toby Sanger, Canadians Director for Tax Fairness, said in a press release. “A beneficial ownership registry will help Canada collect significant tax revenues and ensure that businesses that play by the rules and pay their share are not unfairly disadvantaged.

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