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Who’s Behind the Money?
A Call to Action: Focus on Real Ownership, Not Just Legal Titles
In a shocking expose, Transparency International has revealed that Luxembourg’s massive investment funds industry is shrouded in secrecy. Despite being worth an astonishing 4.5 trillion euros, the true owners behind these funds remain hidden from public view.
The Need for Nuance
Rather than simply focusing on legal entities and formal titles, regulators should shift their attention to the individuals who actually control and benefit from these companies – regardless of whether they occupy official positions or are listed in corporate registers. This means going beyond just identifying those with formal control over an entity and considering indirect influence, family ties, nominee arrangements, and other factors that can impact decision-making.
A Single Definition of Beneficial Ownership
Transparency International is urging regulators to establish a single definition of beneficial ownership, applying it to company registration, customer due diligence, and sectoral disclosure requirements. This would help ensure consistency and clarity in the identification of BOs across different jurisdictions.
Rethinking Control Thresholds
The organization is cautioning against adopting a blanket “25% plus one” threshold for control, as recommended by the Financial Action Task Force (FATF). Instead, regulators should assess the money laundering risks posed by different types of legal entities and adjust their thresholds accordingly. For example, alternative investment funds may require a lower threshold to prevent financial crimes.
Understanding End-Investors
The organization is also emphasizing the importance of understanding the identities of end-investors who benefit from these funds, even if they are not in direct control. This includes requiring financial institutions and designated non-financial businesses and professions (DNFBPs) to have a full understanding of the control structure of legal entities and arrangements.
Measures for Increased Transparency
To increase transparency, Transparency International is advocating for:
- A single definition of beneficial ownership
- Regulators specifying indirect control mechanisms
- Registers including detailed information on control structures and BOs
- Financial institutions and DNFBPs verifying BO information independently
By adopting these measures, governments can help prevent money laundering, terrorist financing, and other financial crimes.
Conclusion
In a world where secrecy can mask illicit activities, it is imperative that governments prioritize transparency and accountability. The time has come to shine a light on the true owners behind the money and ensure that these individuals are held accountable for their actions.
Stay tuned for further updates on this developing story.