New Luxembourg scandal: #OpenLux 2
Dear all,
Thank you Lison for the overview of upcoming stories - that's really helpful! And thanks Christoph for the update and inputs.
A few more resources and analysis below and attached:
OCCRP info about the investigation
OCCRP have now published a helpful story, which includes a bit more background on the investigation, including the challenges related to the Luxembourg registry (which, for example, doesn't allow searches on owners) - see here.
Reactions:
--- Oxfam reaction can be found here.
--- TJN reaction here.
--- Access Info reaction here.
--- Greens / Sven Giegold here.
And the Eurodad reaction is here.
5th Anti-Money Laundering Directive - what can we call for?
As Lison, Christoph and several of the reactions have flagged, one central issue in the investigation is the EU Anti-Money Laundering Directive. In addition to the helpful points flagged by Christoph, I've also attached the Transposition Guide we produced in 2018, after the directive was adopted. It includes points on "Scope for further national advocacy" - i.e. points where the text of the directive isn't strong enough and we need Member States to go further (for example, we have been aware that some countries (not just Luxembourg) came up with the idea of restricting searches on the names of owners (see page 2 of the guide). The guide includes the following specific policy recommendations:
Member States should:
✓ Create public registers according to Open Data principles and in a machine-readable format, to enhance data accessibility and comparability.
✓ Create public registers that do not impede public access by imposing search fees or requiring registration in order to access data.
✓ Ensure that the registry allows searches on all the public elements.
✓ Ensure that the registry allows searches on all the public elements.
✓ EU Member States can choose to go beyond the above minimum EU requirement and require the establishment of fully public beneficial ownership registers for trusts and similar legal structures.
✓ EU Member States should set a beneficial ownership threshold substantially lower than the current 25 per cent threshold. Ideally, Member States could also include a rule saying that in case no owner is above the threshold, the owners with the largest shares should be registered;
✓ If there is no political will to lower the threshold, Member States should at the very least use the 25% threshold as one, but not the only, indicator of beneficial ownership, and specify that a natural person exercising control via other means can also qualify as a beneficial owner. While this will not be a guarantee that circumvention of the definition will not happen, it at least provides scope for owners with an official share of less than 25% can be included.
✓ If there is no political will to lower the threshold, Member States should at the very least use the 25% threshold as one, but not the only, indicator of beneficial ownership, and specify that a natural person exercising control via other means can also qualify as a beneficial owner. While this will not be a guarantee that circumvention of the definition will not happen, it at least provides scope for owners with an official share of less than 25% can be included.
AMLD5 transposition and next steps at the EU level
The European Commission has published their assessment of where Member States are at in the transposition process - as you can see here, we still have a long way to go before the directive is implemented.
In terms of the Commission's own efforts, thinking and suggested next steps, the EC Action Plan from 2020 is also quite helpful - see here.
For example, the plan says:
"EU AML/CFT legislation needs to become more granular, more precise and less subject to diverging implementations. Certain additional requirements imposed by Member States when transposing AML Directives might however contribute to a stronger AML/CFT framework and could be integrated into the future EU rulebook. To limit divergences in the interpretation and application of the rules, certain parts of the AMLD should be turned into directly applicable provisions set out in a Regulation. At a minimum, this should include the provisions laying down the list of obliged entities, customer due diligence requirements, internal controls, reporting obligations, as well as the provisions on beneficial ownership registers and central bank account mechanisms. A more harmonised approach to the identification of politically exposed persons should also be considered. Particular attention should be paid to the effectiveness of the system by providing more details regarding the structure and tasks of supervision in respect of all obliged entities and the tasks of FIUs (see next sections). An integrated EU AML/CFT system will also need a sufficiently detailed rulebook to facilitate direct supervision. In addition, in respect of specific rules, further harmonisation could be achieved by means of empowerments to adopt more detailed rules through delegated or implementing acts to adapt to evolving situations."
As you can see in the plan, the EC has also promised that we will get the inter-connected EU beneficial ownership register in 2021.
And, with warm thanks to Olivia, a few more helpful background points:
About the investigation
OpenLux is an international investigation initiated by Le Monde, in collaboration with the Organized Crime and Corruption Reporting Project and fifteen media partners (see below). Investigative journalists obtained around 3 million documents and records from Luxembourg’s online business register platforms, including documents declaring the beneficial owners of 124,000 commercial companies registered in Luxembourg, covering a period from 1955 to December 2020. The investigation was only possible because Luxembourg introduced a public register of beneficial ownership in autumn 2019.
About beneficial owners and AMLD5
A beneficial owner or ultimate beneficiary, is generally understood as the natural person who owns a percentage of shareholdings of a company. Public registers of beneficial ownership were agreed as part of the 5th Anti-Money Laundering Directive (AMLD5) in Spring 2018 following the tax scandal known as the 'Panama Papers'. AMLD5 requires Member States to establish public registers of the beneficial owners of companies, registers of beneficial owners of trusts and similar legal arrangements that are accessible to everyone with a ‘legitimate interest’, and in the case of trusts that own a company not incorporated in the EU, access to the register should be given upon written request.
Weaknesses in AMLD5
Although the EU beneficial ownership rules have made this investigation possible, a number of significant weaknesses remain including that: 1) Owners who own less than 25 percent of a company do not need to declare their ownership; 2) Member States do not need to make beneficial owners of trusts and similar legal arrangements publicly available, despite the fact that such structures can be used to evade taxes and hide assets; and 3) Limitations on access to data are commonplace, such as an inability to search registers by name, paywalls or other administrative requirements to access information.
Media partners in the OpenLux investigation
The media partners in the investigation are Le Monde (France), IrpiMedia (Italy), IStories (Russia), Arab Reporters for Investigative Journalism (Middle East), KRIK (Serbia), Bivol (Bulgaria), Investigace.cz (Czech Republic), Süddeutsche Zeitung (Germany), Le Soir (Belgium), Woxx (Luxembourg), McClatchy/Miami Herald/El Nuevo Herald (U.S.), Piaui (Brazil), Tempo (Indonesia), Armando.Info (Venezuela), La Nacion (Argentina), and Inkyfada (Tunisia).
Hope this is helpful, and please all feel warmly invited to share any other relevant info, updates or reactions.
Best wishes,
Tove
