G20 & corporate transparency: Put your money where your principles are

In 2014, in the aftermath of the global financial crisis, and as new revelations came to light about the extent of dirty money hidden behind secretive corporate vehicles, G20 countries came together to adopt the historic High-Level Principles on Beneficial Ownership Transparency. Building on recommendations from the Financial Action Task Force (FATF) at the time and the G8’s principles adopted the previous year, the G20’s commitment was a triumph for transparency.

Since then, the world has been shocked by leaks like the Panama and Pandora Papers, ratcheting up the urgency of establishing beneficial ownership transparency everywhere. But this hasn’t always translated into policy action from G20 countries. Now, 10 years on, Transparency International takes stock of where G20 and some of the regular guest countries stand – and what’s still needed to stop the flow of dirty money.

Secrecy allows shady actors to hide behind anonymous companies and obscure who is actually benefiting from them, enabling them to funnel money through different structures until it’s extremely difficult to trace its origins. This makes it nearly impossible for law enforcement to track wrongdoing, recover resources and bring the corrupt to justice. Beneficial ownership transparency makes it clear who pulls the strings and benefits from these companies.

In the highly complex global financial system, true transparency means comprehensive, accurate and up-to-date information so that companies cannot easily be used for dirty deals. The most efficient system is for countries to establish registers listing the beneficial owners of all companies, which are widely accessible not just to government authorities, but civil society and other actors who can ensure accountability. In 2022, FATF acknowledged this by requiring registers in its Recommendation 24 – or at least another mechanism that proves equally effective.

While FATF’s Recommendation applies to more than 200 jurisdictions, transparency is especially important in G20 member states. Not only do they represent the world’s biggest economies and financial markets, but they have been the go-to jurisdictions for laundering and investing illicit funds, often enabling corruption elsewhere. The relative stability of their governments and strength of their financial systems makes them all the more attractive as destinations for ill-gotten gains.

This year, Transparency International assessed the status of beneficial ownership in each of the G20 countries, as well as guests the Netherlands, Spain and Switzerland. The good news is states are committing resources and making progress. Seventeen out of the 23 assessed already have or have begun to establish registers, and 15 already are or are expected to be available by the end of 2024. For comparison, in our last assessment in 2018, just six out of the 23 assessed countries had registers.

But there’s still a long way to go for the registers to be sufficiently comprehensive, accurate and up-to-date. We’ve identified three important areas in which transparency must be improved: scope; access; and verification.

When registers excuse certain types of entities from registration requirements, it leaves gaps in the record. These loopholes can be exploited by the corrupt to continue hiding their ill-gotten gains. Right now, many countries allow a variety of these to slip through due to the way they were developed. In the United Kingdom, for example, registration is required only for Scottish limited partnerships, but not for those based in Wales, Northern Ireland or England. In Canada, only companies incorporated federally must disclose their beneficial owners through a central register, whereas those based in provinces aren’t yet covered.

Countries have, however, expanded scope around the important issue of “foreign legal persons,” i.e., entities that are incorporated in another country but are doing business abroad. This was one of our main recommendations when the G20 High-Level Principles were adopted. Now, FATF recommends this specifically for those that have a money laundering risk, but countries are beginning to require registration more broadly. In Argentina and Turkey, any entity subject to tax must register, while Brazil, Germany and the United Kingdom are tying it to real estate ownership. Gaps remain in France and in the United States, where companies incorporated abroad can easily purchase real estate without disclosing their beneficial owners.

Legal authorities responsible for uncovering dirty money – like tax administrations, law enforcement and financial intelligence units – should not be the only ones with access to registers. Foreign authorities use registers to track down potential suspicious transactions around the globe. Obliged entities – meaning banks and other financial institutions with legal responsibilities to conduct due diligence on customers – need access to this data in order to sufficiently carry out checks. Law-abiding investors and businesspeople need it too, to ensure they aren’t working with shady or corrupt partners. Journalists, civil society organisations and academia use registers for their stories and research to identify illicit financial flows as well as understand risks and policy gaps. More broadly, members of the public can support this effort too. Yet only four countries have or are planning to allow public access to their registers.

The United Kingdom is one of the countries where the register remains open to public access, which allowed for an analysis by Transparency International UK of 146,948 Limited Liability Partnerships (LLPs) incorporated between April 2001 and September 2021. Using register data, they found that more than one in ten LLPs incorporated over this window had characteristics identical to those used in serious financial crimes, such as bribery, embezzlement of public funds and sanctions evasion.

The European Union, which is itself a member of the G20, was a leader in this effort with the 5th EU Anti-Money Laundering Directive of 2018, in which it required all member states to open public access to registers. Unfortunately, the European Court of Justice decided in November 2022 that public access was a privacy violation and required countries to shut it down, while still recognising that journalists and civil society organisations tackling money laundering have a legitimate interest. This was confirmed by the 6th Anti-Money Laundering Directive of 2024 that established journalists and civil society organisations tackling money laundering and predicate offences should have generalised access to beneficial ownership registers. Nevertheless, the ruling remains a blow to transparency. Germany and the Netherlands blocked public access in the immediate aftermath of the ruling, and more recently, France did so as well. In line with new EU rules, all will have to allow those categorised with legitimate interest general access to the registers.

Without sufficient verification mechanisms, the corrupt are free to share false information in registers that leads authorities in the wrong direction – completely defeating their purpose.

Most G20 countries are working on establishing better verification mechanisms, but none are yet totally sufficient. The most recent EU Anti-Money Laundering Directive did require the reporting of discrepancies and established other verification mechanisms like cross-checks with other databases, which is a positive step. In other countries like Argentina and Turkey tax administrations are conducting audits, and Saudi Arabia employs notaries working for the register. Yet on the whole, most register authorities lack jurisdiction to verify, and even those that do rarely have the capacity or resourcing to conduct enough checks. Without public access, it’s difficult to hold them accountable.

After ten years, G20 countries have had more than enough time to follow through on the principles to which they all agreed. Yet Australia, Japan, Mexico, Russia and South Korea, along with guest Switzerland have yet to establish any kind of register. They must rectify this immediately. All G20 countries must not only implement but also strengthen their registers to truly combat financial secrecy and effectively expose corruption and money laundering. These registers must capture all relevant information, be accessible to the public or at least to stakeholders such as civil society and media, and be adequately resourced to ensure accuracy and enforcement.

However, ending financial secrecy requires going beyond companies and trusts. There is overwhelming evidence that the corrupt hide their illicit wealth in assets like real estate and luxury goods, which must also be brought under transparency rules. G20 countries should adopt additional commitments to extend beneficial ownership requirements to these high-value assets and ensure the necessary mechanisms to track and verify ownership data. Most importantly, they must stay vigilant by fostering transparency, coordinating internationally, and partnering with civil society and other stakeholders to continuously expose the evolving tactics used to hide wealth.

Research for this article was conducted by Andres Knobel.