Beneficial Ownership Transparency (AU0002)

2. Beneficial ownership transparency

Commitment Text:

Australia will improve transparency of information on beneficial ownership and control of companies available to relevant authorities.

As part of this, we will consult with the corporate sector, non-government organisations and the public on the details, scope and implementation of a beneficial ownership register for companies, as well as other options to improve beneficial ownership transparency.

[…]

Ambition:

To ensure that adequate, accurate and timely information on beneficial ownership and control is available to relevant authorities in Australia to address issues of tax evasion, money laundering, corruption and terrorist financing.

To improve regional and international cooperation on taxation, including strengthening information sharing between tax authorities and sharing learnings to increase the transparency of beneficial ownership information. We will use outcomes of the work by the Financial Action Task Force (FATF) and the Global Forum on Transparency and Exchange of Information for Tax Purposes to help develop proposals to improve implementation of relevant international standards on transparency, including on the availability and exchange of companies’ beneficial ownership information.

Milestones:

1. Treasury to release a public consultation paper seeking views on the details, scope and implementation of a beneficial ownership register for companies. The consultation will also consider the use of nominee shareholdings to conceal beneficial ownership.
2. Recommendation to Government on the details, scope and implementation of a beneficial ownership register for companies (informed by public consultation).
3. Begin work to implement Government decision on transparency of beneficial ownership of companies.

Responsible institution: Treasury

Supporting institution(s): Various

Start date: February 2017 End date: June 2018

Editorial Note: This is a partial version of the commitment text. For the full commitment text, see the Australia National Action Plan available at https://www.opengovpartnership.org/wp-content/uploads/2001/01/Australia_NAP_2016-2018_0.pdf

Context and Objectives

This commitment considers establishment of a beneficial ownership register in Australia. The principles of beneficial ownership transparency are intended to assist in reducing the ability of companies and other legal arrangements to disguise the identity of those involved in corruption or other illicit activities, including tax evasion, money laundering, bribery, corruption and terrorism financing.^[1] Common approaches to beneficial ownership can also facilitate information sharing among authorities internationally to combat cross-jurisdictional activities. It can also be used to prevent corruption of public officials in the procurement process.^[2]

There are currently various obligations on entities to disclose beneficial ownership information in Australia. Under the Corporations Act 2001 (Cth) companies are required to maintain a publicly accessible register of members, including whether shares are held beneficially. ‘Relevant interests’ in a substantial number of shares in publicly listed companies must be publicly disclosed.^[3] Australian Securities and Investment Commission (ASIC) or a listed company can also issue a ‘tracing notice’ to require public disclosure of relevant interests. Various financial and other organisations[4] also have obligations under Australia’s Anti-Money Laundering and Counter-Terrorism Financing legal framework[5] to verify beneficial ownership information in relation to certain customers. Beneficial ownership information relating to accounts held by foreign residents for tax purposes must also be provided by financial institutions to the Australian tax office and then shared with overseas tax authorities.[6]

However, in its Mutual Evaluation Report, completed in April 2015, the Financial Action Task Force (FATF) – an international body setting beneficial ownership standards - and the Asia/Pacific Group on Money Laundering considered that existing mechanisms in Australia were not sufficient to ensure accurate and up-to-date information on beneficial owners was available.^[7] The report recommended that:

Australia should also take measures to ensure that beneficial ownership information for legal persons is collected and available. Trustees should be required to hold and maintain information on the constituent elements of a trust including the settlor and beneficiary.^[8]

The introduction of a beneficial ownership register has the potential to increase the effectiveness of regulatory oversight of corruption or other illicit activities, including tax evasion, money laundering, bribery, corruption and terrorism financing. If the information was made public, a beneficial ownership register could have a transformative impact on the information available to the public, including information which could be used to scrutinise public officials, including regulatory authorities and those involved in public procurement, by exposing connections with private interests.[9] However, the commitment does not expressly commit to establishing a beneficial ownership register. It commits to consulting on the details, scope and implementation of such a register, making a recommendation to government and work to begin to implement that recommendation, but does not set out measurable standards for that work other than the implicit basis that some form of register will be introduced.

It is the expectation of civil society groups interviewed for this report that the commitment will result in a beneficial ownership register being established which will be sufficient to meet the FATF standard, but not necessarily result in a public register.^[10] Therefore, the potential overall impact of this commitment, including the opportunity for public participation it presents, is moderate.

The commitment does not provide any details on the scope and depth of consultation, and therefore is of medium specificity.

Completion

Milestone 2.1: This milestone is completed. Treasury released a consultation paper on 13 February 2017 inviting submissions over a four-week period.^[11] Treasury also emailed information about the consultation process to various stakeholders and civil society groups who had previously expressed an interest in the issues.^[12] Several national newspapers including Guardian Australia provided coverage of the consultation.^[13] Treasury published all non-confidential submissions on issues raised in or by the consultation paper.^[14]

The consultation paper asks for submissions on a variety of issues, including: the identification of beneficial owners, what details should be collected, how should this information be collected and stored, and how any central register should operate. Issues involving use of nominee shareholders and bearer share and share warrants are also raised.

There were 23 non-confidential submissions responding to the consultation paper from a variety of industry and peak body groups, civil society organisations and individuals. Various submissions raised concerns with the scope of the consultation paper, especially the paper’s failure to raise the issue of whether the register of beneficial ownership should be publicly available.^[15] Other submissions discussed the need to consider how any beneficial ownership register would impact on other existing reporting requirements,^[16] as well as those proposed in other national action plan commitments, including 1.3 on implementing EITI membership which includes a commitment to work towards public available beneficial ownership information.^[17]

When interviewed, Publish What You Pay and Transparency International raised concerns about beneficial ownership of trusts and other legal arrangements not being considered in the consultation paper.^[18]

There was no feedback provided by Treasury on the results of the consultation process. The Government’s OGP mid-term self-assessment report indicated that Treasury was continuing to consult with stakeholders on the beneficial ownership register.

Milestone 2.2: This milestone was not completed within the expected timeframe of 30 June 2017. Interviews with Treasury Officials indicated that a recommendation to government was not expected until October 2017.^[19]

Milestone 2.3: Work to implement any Government’s decision following on from the recommendation was not commenced. It was scheduled to begin in the second year of implementation of the action plan and had not started as of June 30, 2017

There were no changes in government practice within the implementation period of this report.

Next Steps

Depending on what recommendations are made as a result of the consultation, and the government’s decision on those recommendations, in the view of the IRM researcher possible next steps could include:

• Further consultation on expanding any beneficial register to trusts and other forms of legal arrangement, including feedback on the results of the consultation process and its use in any recommendation to government;
  
• Establishing a collaborative process including forming a multi-stakeholder group to consider making beneficial ownership information publicly available;
• A process of evaluation of any implementation of a beneficial ownership register, including costs of compliance and use by authorities, if any.