A private group named ‘Network of Experts on Beneficial Ownership Transparency‘, NEBOT, that is financed by the European Commission, has published papers through the European Commission. NEBOT consists of two non-profit organisations (NPOs) and one university partner:

• Transparency International (TI)
• Tax Justice Network (TJN)
• Transcrime – Università Cattolica del Sacro Cuore (Transcrime – UCSC)

TI and TJN are powerful NPOs funded by the EU and by the governments of US and UK to promote certain public policies on crime fighting (anti-money laundering, AML, and countering financing of terrorism, CFT). Transcrime is a university organisation that deals with AML and CFT and cannot be suspected of having practical knowledge of the companies that have to comply with the regulations.

It is interesting to see that TI and TJN are transformed into ‘experts’ on beneficial ownership transparency, when they are only enabled to present their government-approved political goals as ‘expert-information’.

Six papers
The papers are:

Paper 1 Beneficial owners of European companies (and related risks)
Paper 2 Verification and Quality of Beneficial Ownership Information in the EU
Paper 3 Beneficial Ownership Registration for Trusts Gaps and Loopholes
Paper 4 The Beneficial Ownership Definition for Companies Challenges and Opportunities
Paper 5 Beneficial ownership registers in the EU: Progress so far and the way forward
Paper 6 Linked Beneficial Ownership Data? Challenges and Opportunities

I did not have time to read the full papers, but the abstracts show the familiar themes and hobbys of the AML/CFT propagandists, as do some of the conclusions I read.

Paper 1 Beneficial owners of European companies (and related risks)
According to the abstract in the first paper the authors looked at the ownership anomalies of the companies which owned real estate properties in Paris.

Paper 2 Verification and Quality of Beneficial Ownership Information in the EU
The second paper on the quality of de beneficial owner (BO) registration only deals with organisational circumstances and does not cover the ‘discrepancies’ caused by different interpretations of the BO-definitions. Dutch example: banks think that a shareholder is a BO when he has 25% or more of the shares, though in reality a shareholder is a BO when he or she has more than 25% of the shares. As a result banks report a lot of discrepancies to the Dutch BO-register.

Paper 3 Beneficial Ownership Registration for Trusts Gaps and Loopholes
The third paper is on the trust, a legal form that does not exist in EU-counties (it is an Anglo-Saxon form), something that is not mentioned in the abstract. The policy recommendations in 4.1 are – as far as I can see – already covered in the latest European AML-CFT legislation. Only 1.c) looks new (“where any party (not just the trustee) is resident in an EU country“), that includes beneficiaries, the protector, the initiator and “any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means” (see AMLD4, revised version, article 3). The authors want the legal validity of a trust being based on having registered its BOs, of course that depends on the law applicable to the trust, e.g. British law. The authors demand public access of the BO-information of trusts, forgetting about fundamental rights and about the decision of the EU-court.

Paper 4 The Beneficial Ownership Definition for Companies Challenges and Opportunities
According to the authors of the paper:

Currently, the BO definitions lack clarity, are subject to different interpretations and implementation by Member States, and most problematically, may not be identifying all the relevant individuals

That is peculiar as the definitions should be based on AMLD4, revised version. It is amazing that the authors want about everyone included in a revised BO-definition: “a highly comprehensive BO definition that covered as many individuals as possible“. They suggest:

To make the definition enforceable, the criteria on control should also become more “mechanical”, i.e. similar to following a simple check list, such as identifying every natural person with a power of attorney, anyone with control over the bank accounts, anyone who participates in the board of directors, etc.

As a consequence unnecessary personal data of people will be processed by authorities and obliged entities and the original purpose of AML/CFT is forgotten. This proposal is against the data minimalisation principles of GDPR. This is going much too far. It shows how dangerous AML/CFT legislaton is for the fundamental rights of Europeans.

Paper 5 Beneficial ownership registers in the EU: Progress so far and the way forward
The authors express an unfounded belief in the usefullness of BO-registers and seem to have missed the decision of the EU-court on public access. Not surprisingly the authors discovered the implementation of the BO-registers has not been without problems. Europe as usual was much too optimistic about the time and effort necessary.

In the conclusion they of course repeat the familiar mantra:

The analyses carried out for this paper show that beneficial ownership registers are an important tool for competent authorities, obliged entities, and civil society to prevent, identify, and tackle money laundering and financial crime in the EU.

This remains untrue, even if it is repeated a million times.

In the conclusion they also keep promoting public access of the BO-register and ignore the data protection risks attached to the BO-register (these risks are also relevant for the whole concept of privatisation of the fight against crime). Of course no measures are proposed to protect the data protection interests of the people in the register. It is the opposite: the authors want to enable every member of the public to download the full data of BO:

Member States should:

• Provide API access to every type of end-user national and foreign competent authorities, obliged entities and the public.
• Make sure the API enables the download of datasets and useful features such as delta updates.
• Ensure that data is made available in a structured format, for example, in line with Open Ownership’s Beneficial Ownership Data Standard (BODS).
• Provide adequate search functions for all types of end-users, allowing for searches using parts of the name of a legal entity and beneficial owner.
• Improve the conditions for the interconnection of registers with other databases, including the implementation of unique identifiers for both legal entities and natural persons (set at the international level).
• Ensure that all functionalities of the register available to competent authorities and obliged entities are also available to the public.

The authors completely ignore the fundamental rights of people in the BO-register. It makes me wonder what powers are behind TI and TJN these kinds of measures are being proposed.

It is strange that the authors think that there are ‘entities that carry high money laundering risks’ and that do not yet have to register their BOs. It looks as if the authors of this paper have insufficient knowledge of current AML/CFT legislation and a complete disregard of fundamental rights.

Paper 6 Linked Beneficial Ownership Data? Challenges and Opportunities
This paper discusses the use of BO-data and combining the information with other sources. It is clear to see that the people registered as BOs in future will be monitored by both the autorities and by private parties that have the money and the resources to do that.  The technical recommendations (part IV) show the way this surveillance can be achieved. In the conclusions the authors only speak about “investigating and tracing illicit financial flows“. They do not inform the public about the fact that in these investigations they will monitor every BO (and probably every citizen) in the world and will collect a vast amount of personal data.

Read the conclusions:

Conclusions

As demonstrated in the case studies, linked data can significantly boost the possibility for investigating and tracing illicit financial flows. This can be done through using various datasets, including beneficial ownership data, public procurement, real estate registers, company registers and others. Data-linking helps to identify inconsistencies across databases, as well as reveal otherwise hidden connections between companies or individuals.

However, there are many challenges along the way to getting a good match between data and being able to extract as much information as possible from the linked datasets. The absence of unique identifiers, especially when it comes to working with multiple countries, imposes significant limitations that cannot be overcome simply or easily by advancing the technical skills of the people working with data. Different units of analysis require additional efforts to align the datasets and can frequently result in information loss due to the higher level of observations. Finally, the variables themselves can limit comprehensive analysis due to the low quality of observations, missing values, data errors and other issues.

Putting additional efforts into developing and monitoring the implementation of data standards in governmental agencies as well as making data open to the general public and NGOs and allowing them to use it for independent investigations would significantly boost dark money tracing and increase the efficiency of monitoring.

Final remark
The papers nicely document the political views of TI and TJN and their disinterest in fundamental rights and practical feasibility.

I advise the European Commission, the Council and the Parliament, not to follow up the recommendations of these ‘experts’ and to comply with European fundamental legal principles.

Note

[1] According to the justification, the content of each paper is the responsibility of the respective authors, this is the text of paper 1 (is similar in the other papers):

This project is performed by Transparency International Secretariat (TI-S), together with Tax Justice Network (TJN), Transcrime – Università Cattolica del Sacro Cuore (Transcrime – UCSC) and the Government Transparency Institute (GTI), under a contract with the European Union represented by the European Commission. The opinions expressed are those of the authors and do not necessarily represent the views of all NEBOT members.

This document has been prepared for the European Commission. However, it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. The European Commission is not liable for any consequence stemming from the reuse of this publication.

More information:

• Papers by the Network of Experts on Beneficial Ownership Transparency, NEBOT, included in: Final report annexes Preparatory action, Capacity building, programmatic development and communication in the context of the fight against money laundering and financial crimes, published by the European Commission [*], 2023.
• The papers are the annex to: Final report, Preparatory action, Capacity building, programmatic development and communication in the context of the fight against money laundering and financial crimes, published by the European Commission [*] 2023.

[*] Directorate-General for Financial Stability, Financial Services and Capital Markets Union.