Beneficial Ownership Transparency: A Guide for Parliaments

Why Does Beneficial Ownership Transparency Matter?

In concrete ways, BOT lays the foundation for a more equitable, inclusive and prosperous society and is critical in combating crime, corruption and unfair practices. Specifically, BOT is critically important for fighting illicit financial flows, ensuring fair markets and economic stability, as well as promoting democracy and accountability.

"The Government must [. . .] urgently [propose] legislation that will stop the abuse of U.K. property and companies for the purposes of economic crime. Economic crime through the U.K. harms our global reputation, damages our tax receipts, and endangers our national security." – Margaret Hodge, Member of the U.K. House of Commons, 2021*

* Find source here.

Fighting Crime and Corruption

BOT curbs financial and organized crime. Opaque ownership structures are a tool for criminals to launder money, finance illicit activities and organized criminal activity (e.g., terrorism, drug trafficking), and evade sanctions. Transparency makes it harder for criminals to hide their activities and assets. BO information can help tackle money laundering, terrorism financing and financial crimes. It can also help governments to recover stolen assets.

BOT reduces corruption. Transparency sheds light on relationships between governments, politicians and businesses, making it harder for corrupt practices to flourish. It promotes integrity in government by uncovering potential conflicts of interest.

BOT helps fight tax crimes. Tax authorities can better prevent and detect tax evasion and fraud by knowing who ultimately owns and benefits from companies.

Ensuring Fair Markets and Economic Stability

BOT levels the playing field. Hidden ownership can give unfair advantages to companies whose true owners can engage in unethical or illegal practices. Enabling companies to conduct due diligence and risk management with access to better information can level the playing field for small and medium-sized companies. The World Bank integrates BOT into the B-READY project, aimed at enhancing business and investment climates.

BOT protects investors. Investors benefit from knowing who they are doing business with and who their fellow investors are, allowing them to make informed decisions and reducing the risk of fraud and financial crime.

BOT strengthens financial integrity. Weak regulatory frameworks around beneficial ownership can have economic consequences. Transparency enhances financial integrity and stability.

BOT fosters competition. Information about ownership concentration helps understand market concentration and regulate competition.

Promoting Governance, Democracy and Accountability

BOT empowers citizens. Citizens’ access to beneficial ownership information allows them to hold governments and businesses accountable, fostering trust and good governance.

BOT supports investigative journalism. Journalists can use the information to shed light on corruption, financial crime, and other forms of wrongdoing, contributing to a more informed society.

BOT strengthens civil society. NGOs and other civil society organizations can use beneficial ownership data to advocate for reforms and promote corporate accountability.

BOT can help safeguard democratic elections. BO data can expose the true involvement of individuals and businesses in election processes, for instance, by ensuring greater transparency in campaign financing.

BOT registries can help improve public procurement and licensing. Information on company ownership and control helps governments improve public procurement and licensing by detecting fraud and corruption, better managing their own risk, and stimulating healthy competition.

BOT can improve national security and better manage natural resources. BOT information can be used to help governments know who they are doing business with in defense procurement and projects affecting the natural environment. It can help address concerns about opaque political financing and electoral involvements through companies (such as the 2020 Corporate Transparency Act in the U.S.) as well as for implementing sanctions, particularly after the 2022 full-scale Russian invasion of Ukraine.

Next page: How is Beneficial Ownership Transparency Governed Internationally?