Mexico Takes Step Towards Transparency with Beneficial Ownership Disclosure Rules

Mexico is set to implement beneficial ownership (BO) disclosure rules, joining over 90 countries worldwide in committing to transparency. This move aims to combat corruption, fraud, and money laundering.

A Critical Aspect: Definition of Beneficial Ownership

The definition of BO is a crucial aspect of the regulation. Open Ownership has conducted an analysis of definitions from across the globe, identifying best practices and principles that should be applied when drafting legislation. According to their policy briefing, a single, comprehensive definition of BO should include:

• A broad catch-all definition capturing individuals who have the right to share or enjoy income or assets, or direct or influence the entity’s activities
• Specific attention paid to natural persons (not legal entities)
• Coverage of both ownership and control interests, as well as indirect and direct interests

Draft Definition Emphasizes Loophole Minimization

The draft definition emphasizes the importance of minimizing loopholes by requiring only individual names to be disclosed as beneficial owners. It also covers multiple ways in which a person might benefit from or exercise control over a corporate entity, including:

• Direct and indirect ownership stakes
• Informal arrangements where individuals may hold legal title on behalf of others

Low Threshold for Disclosure Crucial

A low threshold for disclosure is also crucial, with Open Ownership recommending that anyone ultimately controlling or benefiting from a 5% share in a given company should be required to disclose this information. Lower thresholds could also be applied for high-risk sectors and individuals holding senior political office.

Considerations for Mexico’s Legal Definition

As Mexico drafts its legal definition of BO, it will need to consider these various elements carefully. Seemingly minor decisions can have significant consequences for system development and data publication. By drawing on international implementation experiences, Mexico is well-positioned to create a robust definition that effectively reveals the identity of firms’ beneficial owners and helps the country meet its anti-corruption policy goals.

Far-Reaching Implications

The successful implementation of BO regulations has far-reaching implications, including:

• Improving government contracting processes
• Detecting incidents of collusion, corruption, and conflicts of interest
• Ensuring that funds reach legitimate actors

In the context of a global pandemic and economic crisis, these benefits are more crucial than ever.