LETTERS: AS it is the season to be jolly, I look back on the times when I was a child excitedly unwrapping gifts under the Christmas tree.
At times, I unwrapped multiple layers of paper until I reached the item I had longed for.
Sometimes it was a surprise and, at times, it was what I had guessed it would be.
Today, as a professional in fraud management and anti-corruption, I see myself doing a similar exercise to uncover culprits who hide behind large corporations, and who benefit from gains.
Here, we see how criminals — money launderers, tax evaders and corrupt individuals — hide behind multiple layers of holding companies, subsidiaries and trusts to hide their illegal schemes.
Take the movie The Laundromat, on Netflix, for example. It portrays the means by which the law firm Mossack-Fonseca registered more than 15,000 shell companies around the world to hide ill-gotten gains owned by corrupt politicians, celebrities and elite families.
It is to no surprise that these structures will be exploited due to their very nature of being “legal persons”, or an entity separate from a particular individual (“natural person”).
These cases came to light with global exposes such as the “Panama Papers” and “Paradise Papers” that show the bewildering number of layers of ownership of offshore companies.
2015 saw the expose of Peruvian drug trafficking ring Sanchez-Paredes, which used anonymous companies in Florida to help launder US$31 million in drug money through banks in the United States.
My recent call to the European Union to discuss corrupt money flows alerted me that even developed nations face these issues.
There are calls for transparency of beneficial ownership of corporate entities.
The Fifth EU Directive released on June 19 last year called for a publicly-accessible registry across the board to shed light on the matter.
The Financial Action Task Force, through its paper on the “Best Practices On Beneficial Ownership For Legal Persons” released in October this year, also called for the need for such publicly-available information and sanctions on those who do not reveal the beneficiary behind corporate entities.
Back home, we have allegations of such practices as well, mainly in the mining, timber and logging industries.
Hence, legal reforms were made in the Companies Act 2016, with Sections 56 (1), (2) and (6) deeming it necessary for company secretaries to give notice to the Companies Commission Of Malaysia on beneficial ownership, or on the ultimate owner benefiting from the company’s business.
Non-adherence will result in sanctions and penalties.
To ease the process of obtaining information and providing a proper avenue to do the same, CCM has proposed a Beneficial Ownership Reporting Framework.
The framework, which has undergone public consultation, is being finalised to get companies to obtain, report, verify and update beneficial ownership information in a timely manner.
The said information will be first made accessible only to authorities and law enforcement agencies for the time being, with much discussion ahead on possible publicly-accessible information that will benefit stakeholders.
Such information should be made available to the public.
Corporate sector entities, civil societies, journalists and public should have the right to access the information.
For one, it will be good for corporations to gauge such information in their due diligence before forming business relationships.
And for civil societies, journalists and the public to conduct research and monitor activities or ventures undertaken by politicians or people in power.
We can learn from the Transparency International initiatives adopted by the United Kingdom, for instance.
The country has set up public registers of company beneficial ownership information that emphasise transparency of information to all parties, including businesses, civil societies, journalists and the public.
It has been made a legal requirement for companies to report, verify and update information put forth in the registry.
Such information is downloadable and re-usable by anyone without paywalls.
The country has introduced property registers to make it harder for corrupt individuals to use opaque company structures to buy properties and even embark on international and domestic cooperation initiatives to tackle cross-border abuse of shell companies.
The move to uncover beneficial ownership of corporate entities is in line with the government’s efforts to eliminate corruption.
This will strengthen public institutions and the corporate sector towards realising the National Anti-Corruption Plan (2019-2023) launched by the prime minister in January.
RAYMON RAM
PETALING JAYA, SELANGOR
The views expressed in this article are the author’s own and do not necessarily reflect those of the New Straits Times