Judith Sargentini | Photo credit: European Parliament audiovisual
Every year, billions of euros are laundered by criminals all over the world, including here in the EU. In a few short years, multiple revelations and scandals have shown the outrageous ways that criminals use our financial system and find manoeuvring space within our laws to hide money away from the police and tax collectors.
A chain of companies and trusts are set up, allowing the criminal space to conceal their activities. Transparency is therefore essential in shining a light on the anonymous shell companies and trusts hiding the identity of those who ultimately benefit.
Back in 2014, following tough negotiations with the member states, Parliament secured the establishment of the ultimate beneficial owner (UBO) register for companies.
This meant that our governments were required to set up a public register containing information on who the UBO of a company is. Unfortunately, member states blocked the possibility of having transparency when it comes to trusts.
However, this all changed following the Panama Papers. This scandal showed we needed to do more: highly ranked government officials and famous individuals were shamelessly using trusts to avoid and evade paying their taxes.
Within a single parliamentary mandate, the EU directive on combating money laundering and terrorism financing has been changed twice.
As in the first round of reforms, the most recent set of talks was far from an easy ride. Although it was clear we needed to have transparency on trusts, many member states opposed tougher rules. Following nine rounds of intensive negotiations under two presidencies, we finally agreed on creating a public register for trusts.
Now, anyone that can show they have a legitimate interest can access the register to understand who hides behind a trust.
Public scrutiny is a powerful tool. It allows citizens to make considered choices when deciding which companies they should support or buy from. It also helps investigative journalists and civil society play an important role in our democracies.
In addition to the UBO register, the directive demands that a wider scope of entities obliged to conduct a ‘know your customer’ check. This includes estate agents and providers of exchange services between virtual currencies such as Bitcoin.
I would urge member states to do their utmost to transpose the directives and, in particular, to ensure public registers on who hides behind companies and trusts are set up as rapidly as possible. This would contribute significantly to the prevention of money laundering, tax avoidance, tax evasion and terrorist financing.