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Lack of Transparency in Ecuador’s Shareholder Filings Raises Concerns

A recent report by the Organisation for Economic Co-operation and Development (OECD) has highlighted concerns over the lack of transparency in Ecuador’s shareholder filings.

OECD Report Highlights Gaps in Monitoring and Enforcement Mechanisms

The report, which reviewed Ecuador’s compliance with international standards on beneficial ownership information, found that there are significant gaps in the country’s monitoring and enforcement mechanisms. According to the report, Ecuador’s tax law requires companies to maintain beneficial ownership information, but there is no control mechanism in place to ensure compliance.

Challenges in Maintaining Ownership Information

• There are also challenges in maintaining ownership information for inactive or dissolved companies, as well as other types of relevant entities and arrangements.
• The Register of Beneficial Owners, designated for this purpose, is not currently operational, and details regarding its implementation remain unspecified.

Tax Administration’s Monitoring Lacking

The Tax Administration’s monitoring of filing obligations has shown inconsistencies, with unclear data on compliance and actions taken against non-compliant entities. While penalties have been applied in some cases for delayed submissions, the deterrent effect appears limited due to relatively low penalty amounts.

Recommendations for Improvement

• Ecuador should enhance its supervision and enforcement actions to ensure the availability of legal ownership and identity information in all cases.
• The country should implement a Registry of Beneficial Ownership and monitor its functioning to ensure that beneficial ownership information is available for all relevant entities and arrangements.
• Ecuador should monitor reliable accounting information for entities not subject to the supervision of the Superintendency of Companies, including partnerships and foreign trusts with a nexus with Ecuador.
• The country should ensure that accounting information is available for a minimum period of five years in relation to legal entities that cease to exist or redomicile out of Ecuador.

Conclusion

The OECD report highlights the need for Ecuador to improve its supervision and enforcement mechanisms to ensure transparency in shareholder filings. The lack of control over beneficial ownership information and incomplete data on compliance and actions taken against non-compliant entities raises concerns about the country’s ability to effectively monitor and regulate financial transactions. Addressing these concerns is essential to maintaining a stable and transparent financial system.