Leading academic questions effectiveness of UK-style central registry
10 May 2016
The effectiveness of central registries of beneficial ownership in combatting financial crime has been questioned by a leading academic in global financial regulation, reports Jersey Finance.
Speaking at Jersey Finance’s Private Wealth Conference in London, Professor Jason Sharman challenged the assumption that registries, such as the one being implemented by the UK, would bring transparency to the monitoring of company ownership.
Addressing more than 400 senior private client tax, trust and wealth management professionals, he said that central registries were “not the only way of finding companies’ beneficial ownership” and that, due to their passive nature and lack of verification processes, “may not even be the best means of doing so”.
“People in registries rightly see their role in a fairly passive or archival way,” Professor Sharman said. “Registries receive information but they have little desire or capacity to verify it, so making them the guardian of this valuable beneficial ownership information runs up against the fact that they neither have nor want a verification function.”
Commenting that transparency was currently a “buzzword” amongst politicians and lobby groups, Professor Sharman said: “It is simply not possible to say that centralised registries work better than the leading alternative, and it is demonstrably wrong to say that they are the only way of achieving corporate transparency. A beneficial ownership regime based on licensed corporate service providers (CSPs) is a better solution…CSPs have an incentive to ensure records are accurate in that false records may lead to a revocation of their licence.
“When it comes to beneficial ownership regulation, at present by far the biggest problem is the United States, which has neither licensed CSPs nor registries of beneficial ownership information… It is peculiar that IFCs are subject to much more international pressure, even though objectively their performance is much better. This disparity seems to be an indicator of the degree to which the policy debate over beneficial ownership is dominated by politics and public relations concerns, rather than a genuine desire to fix the problem of untraceable shell companies.”
Geoff Cook, CEO of Jersey Finance, who introduced the conference, said:“What is quite frightening in the case of the ‘Panama Papers’, however, is that in the space of three weeks we have witnessed a media frenzy based on allegation and speculation lead to a celebration of data theft and a kneejerk reaction in proposing potentially incredibly expensive legislative change, without any sort of impact analysis. It seems governments are rushing to find new solutions when in fact – in the case of the regulated CSP model such as Jersey’s – we already have one.”
Professor Jason Sharman’s latest report, ‘The Beneficial Ownership Conundrum’, can be downloaded in full at www.jerseyfinance.je. His full speech can be seen on the Jersey Finance YouTube channel, www.YouTube.com/JerseyFinance