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European Parliament Urged To Ban 'Anonymous Shell Companies'

by Ulrika Lomas,, Brussels

06 February 2014

The European Parliament has been urged to support the creation of public registries of corporate ownership by a Washington DC-based research and advocacy organization.

Global Financial Integrity (GIF) studies and promotes policies designed to curtail illicit financial flows. Its latest research project revealed that USD68.9bn flowed illegally into and out of developing and emerging European Union (EU) member states in 2011. Bulgaria, Croatia, Latvia, Lithuania, Poland, and Romania were the worst hit, collectively "haemorrhaging" USD20.8bn.

GFI Junior Economist Brian LeBlanc, who compiled the analysis, described the scale of this activity as "devastating." He warned that there has been "an incredibly worrying acceleration in both illicit inflows and outflows," and called for an end to the use of "anonymous shell companies."

According to Joshua Simmons, Policy Counsel at GIF, "anonymous shell companies make it easier for criminals to move money across borders without a trace. They place an essential role in the money laundering process."

To tackle the phenomenon of these so called "phantom firms," governments would need to be able to identify the beneficial owner of a company when it is formed. GIF claims that by making this information available to the public, the EU would achieve a "gold standard" in transparency. This would enable citizens and other countries to know with whom they are doing business, and would in turn empower civil society organizations, journalists, and investors to hold individuals accountable for their companies' actions.

Members of the European Parliament (MEPS) are scheduled to vote on key revisions to the EU's Anti-Money Laundering Directive on February 13. Simmons urged "every MEP to take a strong step toward curbing money laundering and hampering crime."

In June, 2013, leaders of the G8 group of nations adopted an Action Plan on the transparency of ownership and control of companies. It stated that firms should obtain and hold information on their beneficial ownership, and recommended the creation of central registries containing these details, at either national or state levels.

In October, the UK Government announced that it would pursue this proposal further, confirming that a register will not only be compiled, but will also be open to the public.

UK Prime Minister David Cameron said at the time that the Government will use the data "to pursue those who break the rules." Businesses will be able "to better identify who really owns the companies they're trading with," while developing countries will have "easy access to all this data, without submitting endless requests for each line of enquiry."

TAGS: individuals | compliance | tax | business | tax compliance | Bulgaria | Latvia | Romania | United Kingdom | Poland | revenue statistics | trade association | trade | European Union (EU) | Croatia | Lithuania | Europe

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