Have registry of beneficial owners of firms to fight graft, says TI-M

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Source: FreeMalaysiaToday

Transparency International Malaysia says the requirement for disclosure of beneficial ownership can help stop the proceeds of corruption from being laundered through investments in high-value property in Malaysia.

Transparency International-Malaysia chairman Akhbar Satar – The Malaysian Insight pic by Kamal Ariffin, February 22, 2018.

KUALA LUMPUR: Transparency International Malaysia (TI-M) has proposed the setting up of a central registry for beneficial ownership of companies registered in Malaysia and those keeping funds in Labuan.

Noting that graft was the biggest problem for businesses in Malaysia, its president Akhbar Satar said today this was one way to fight corruption and money laundering activities,.

A beneficial owner of a company is the person who truly owns, enjoys and controls the company even though the title to some form of property or security is in another’s name.

Akhbar said in a statement that such a registry would ensure corrupt officials and politicians would be unable to award themselves, through their families or cronies, any government contracts.

It can also promote good governance and prevent companies from being misused or involved in illicit business, and help identify and report suspicious activities.

Such accountability, he said, would attract investors who would be able to access information and scrutinise relevant data when considering an investment.

He noted that the Panama Papers, the world’s biggest leak, had highlighted the complex ways used by companies and individuals to conceal who were the actual beneficiaries of a company.

The information was leaked from the database of the fourth biggest offshore law firm, Mossack Fonseca, he said. Someone from the firm is alleged to have leaked 11.5 million financial and legal records, exposing a system that appeared to facilitate economic crime.

The Panama Papers revealed 12 national leaders were among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens. Some of them put their money into offshore accounts such as in Labuan, which is also an off-shore financial centre and tax haven.

“The government should ensure that all information related to the person who ultimately controls or benefits from companies is included in a central business registry, which the public can access,” Akhbar said.

For a start, he suggested, the government make it mandatory for all companies bidding for public sector contracts to disclose those who actually owned, controlled or benefitted from the company.

He gave as example what had been done in the United Kingdom. “The UK government has introduced and created the world’s first public register of the ultimate owners of companies. This means that anyone will be able to find out who owns and controls British companies, even if they are owned by an offshore company or trust.”

On July 11, 2016, the US introduced a rule which requires financial institutions to collect information on significant beneficial owners of legal entities.

“Creating and accessing this open data repository is important to disclose who owns the companies and makes it more difficult for fraudsters and white collar criminals to hide their illegal money, and also helps to detect acts of corruption, tax evasion and money laundering,” Akhbar said.

He noted that in the Global Corruption Barometer (GCB) 2017, 60% of Malaysians felt that the level of corruption had increased whilst only 11% said that corruption had decreased. This is in contrast to the 2013 GCB survey, where only 39% of respondents felt corruption had increased.

There are also studies that show terrorist financing, money laundering and corruption are among the by-products of offshore secrecy.

In Malaysia, the police’s Commercial Crime Department reported that “any criminal activity that generates significant profit creates a need for money laundering. Organised crime and financial crime together costs Malaysia between RM15 billion and RM25 billion per annum”.

Akhbar said: “The requirement for disclosure of beneficial ownership can help stop the proceeds of corruption, transnational crime and organised crime from being laundered through investments in high-value property in Malaysia.”