What’s in it for business? The US case: Lessons from private sector and civil society advocacy for beneficial ownership transparency reforms

Overview

Beneficial ownership transparency (BOT) reforms aim to create a more transparent business environment where it is harder both for ill-intentioned suppliers to mislead legitimate corporations and for criminals to hide behind anonymously owned companies and enjoy the benefits of illicit gains.

In a 2017 report, the International Chamber of Commerce’s Business Action to Stop Counterfeiting and Piracy (BASCAP) and the International Trademark Association (INTA) estimated that counterfeit and pirated goods would be worth about USD 3 trillion globally by 2022. [1] In the United States (US), anonymously owned companies have been used to sell millions to billions of dollars worth of counterfeit goods, ranging from cellphones to luxury handbags, anti-virus software, and even medicine, thereby potentially presenting a public health risk. [2]

The last few years have seen a rapidly increasing number of countries commit to BOT, with several governments developing legislation and systems to collect, verify, and store information about the natural persons who own or control corporate vehicles – the beneficial owners – and making this information available to a range of data users.

In the US, a variety of business and civil society actors have contributed to the passage of foundational legislation, which has paved the way for beneficial ownership (BO) reforms in the country. The Corporate Transparency Act of 2021 (CTA) provides for a centralised register of beneficial ownership information on companies, accessible to law enforcement and competent authorities. [3] This case study highlights learnings from the decade-long effort to bring about BO reform in the US. It presents useful lessons to help those in civil society and the private sector to support BOT reforms in other countries.

It proved critical that influential actors, such as the Bank Policy Institute (BPI), [4] came out in support of BO reforms as the awareness and understanding of the potential benefits of BOT for businesses increased. Some of the main benefits to business that private sector actors rallied behind included:

• access to BO data for designated financial institutions to help comply with anti-money laundering (AML) and Know Your Customer (KYC) regulatory requirements;
• access to BO data for law enforcement to investigate and prosecute fraudulent companies, including those that defraud small- and medium-sized businesses and underbid them over the course of public procurement in order to protect legitimate businesses; and
• deterrence for bribery over the course of public procurement and licensing, ensuring more equal opportunities for legitimate businesses.

With this in mind, BPI and financial service providers’ support for BOT helped rally other corporate voices and balance opposition from other business associations. As such, private sector actors’ advocacy strengthened the work of civil society, helping define common goals and achieve legislative progress in the US.

The CTA was signed into law in 2021, turning the focus to how to effectively establish and implement a central BO register in order to generate high-quality, usable data that helps meet the US policy goal of protecting national security by helping prevent and detect the abuse of anonymously owned companies. Over the course of 2021-2023, the US government conducted a number of public consultations to help shape this. [5] Using Open Ownership’s principles for effective beneficial ownership disclosure, the following key lessons can be drawn: [6]

• beneficial ownership transparency is in businesses’ interest;
• partnerships are critical to laws being passed; and
• effective reforms don’t stop at passing laws.

Corporate actors play a central role in advancing the implementation of BO reforms, as they are not only required to disclose data to the BO register, but they also have an interest in using the data to conduct due diligence on suppliers, partners, and customers. These actors can hold governments accountable for delivering effective reform as well as urging them to use existing resources to ground action in evidence and strive for the greatest impact.

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