Sunny places, shady deals: financial secrecy is an inequality issue

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Louise Russell-Prywata

2018-19 Atlantic Fellow for Social and Economic Equity

You may have seen Danske Bank in the headlines recently: its Estonian branch was charged in what could turn out to be one of the world's largest-ever money-laundering cases. Of course, it's easy to switch off when the talk is of intangible sums in the billions, tied up in complex financial-regulation issues that feel far removed from our everyday lives. But headlines like these are, at heart, about inequality; these are stories in which some of the world’s wealthiest people appear to have stolen huge sums from underfunded public sectors, systematically enabled by their banks and advisers.

The financial secrecy that protects them is made possible both by banks and by government policies that allow people to own companies virtually anonymously. And it’s not just useful for criminals and money launderers.

For example, what if you have a large UK income and don’t fancy handing over a sizeable portion to the tax office? High earners like Formula 1 star Lewis Hamilton have set up companies offshore, drawing accusations that the aim is to avoid paying taxes in the UK.

In fact, this practice is not even illegal (at least, not all of the time), and is a very common service provided by money managers of the wealthy. Researchers estimate that the super-rich have squirrelled away an amount equivalent to 10% of global GDP in offshore low-tax regimes.

To find out about the Danske Bank case (and Lewis Hamilton's tax affairs), we have had to rely on the work of whistleblowers, including those who brought the so-called Paradise Papers to light. But we shouldn't have to wait for such revelations. It is possible to fix the system and stop anonymous company ownership.

This is what we are doing at OpenOwnership, where I work. We work to get more information about who owns companies around the world into the public domain. We link information from different countries through our global register of company ownership, to help journalists and others uncover information about questionable chains of ownership.

In policy-speak, this work is known as beneficial ownership transparency. As you might guess, it gets pretty technical, and it involves both changes to government policies and creating technical solutions to link up large datasets from different countries. But it is possible, and it is already starting to happen.

In my recent piece for the Global Anti-Corruption Blog, a space where academics and practitioners working in this area exchange ideas, I argue that the technical solutions we need to link up company ownership data up already exist. I talk about the Beneficial Ownership Data Standard that we are developing, which enables data from different countries to be linked, as well as the global OpenOwnership Register, which actually connects it all.

Finally, I argue that the tech solutions we have to hand are more advanced than the policy that could make use of them. What we need to do now is use these tools to push our governments to move faster to bring anonymous company ownership - and practices it hides - to an end.

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Louise Russell-Prywata is a 2018-19 Atlantic Fellow for Social and Economic Equity. She is Program Manager at OpenOwnership, a global non-governmental organization that promotes greater corporate transparency by making it easier to publish and access data on company ownership. She was previously Head of Development at Transparency International UK. Louise tweets at @_LouiseRP 

Read Louise’s original post for The Global Anti-Corruption Blog: “To Be Effective, Public Company Ownership Registries Must Be Linked”.

The views expressed in this post are those of the author and do not necessarily reflect the position of the Atlantic Fellows for Social and Economic Equity programme, the International Inequalities Institute, or the London School of Economics and Political Science.