What does it take to ensure disclosure?

Authors:

Briefing authors: Ramandeep Kaur Chhina and Tymon Kiepe        

Over 100 countries have committed to BOT, but what does it take to drive up compliance and dissuade criminals from misusing legitimate entities? In a new briefing, Open Ownership looks at the legal, policy and technical aspects of sanctions and their enforcement.

The Financial Action Task Force and the EU's 5th Anti Money Laundering Directive ask countries to implement “effective, proportionate, and dissuasive” sanctions and enforcement for breaches of BOT provisions, but neither prescribe measures. This policy briefing identifies emerging good practice and outlines the key policy principles.

Establishing an effective, proportionate, dissuasive, and enforceable sanctions regime for noncompliance with BO disclosure requirements is a core tenet of the Open Ownership Principles. To ensure sanctions regimes are comprehensive and do not contain loopholes, they should contain:

• Sanctions against?all types of compliance violations, including non-submission; late, incomplete, incorrect or false submission; and persistent noncompliance
• Monetary fines that are set sufficiently high, so they are not regarded as the cost of doing business for noncompliance with their BO disclosure requirements
• Non-financial sanctions (which may prove more effective than monetary fines)?and?criminal sanctions?against both natural persons and legal entities
• Sanctions covering?all the persons involved in declarations and?key persons of the company, and the company itself: the beneficial owner(s); declaring person; company officers; and the legal entity

In looking at emerging good practice in disclosure systems around the world, OO identified the following features as having a strong potential to contribute to effectively operationalising sanctions and their enforcement:

• Clearly determining the authority that would be responsible to enforce sanctions?and ensure that the designated authority has sufficient resources, legal mandate, and powers to enforce sanctions, including carrying out investigative or law enforcement functions
• Establishing proper procedures and processes to ensure the effective exchange of information?between the agencies responsible for enforcement, for instance, between the registrar and prosecution authorities
• Ensuring they have the necessary?jurisdiction over the legal person supplying information about?non-domestic entities and beneficial owners, for instance, by creating a requirement for a domestic legal person to be involved in disclosure
• Publishing information about noncompliance?and making information on sanctions imposed available to the public to drive up compliance by companies
• Automating sanctions mechanisms where possible; establishing a robust verification system?to be able to better detect the submission of false information; and reversing the burden of proof?for administrative or civil fines and sanctions

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