When the G20 summit, comprised of the world’s 20 strongest developed and emerging economies, was held this month in Brisbane, Australia, how to deal with worldwide corruption was a key focal point.
But in the view of many working to curb corruption, a final communique put out by G20 nations fell short of expectations and failed to fully address systemic corruption problems.
That’s the reaction by a number of transparency and good-governance groups who say an important opportunity to “fix the system” was squandered.
“The G20 passed up a golden opportunity to begin tackling this global scourge by curbing the abuse of anonymous companies, and instituting public country-by-country reporting for multinational corporations,” said Raymond Baker, president of the Washington-based group Global Financial Integrity.
Open letter seeing action
Ahead of the summit, Baker, along with the heads of Transparency International, the U.N. Convention Against Corruption Coalition, Oxfam, CARE, Amnesty International, and numerous other good-governance groups and NGOs, published an open a letter to the G20 calling on its member nations to act quickly.
“You, the leaders of the world’s largest economies, must make the global financial system serve its citizens,” the letter said. “As long as there are places in the global financial system where illicit financial flows can find a safe harbor, and there are people to help hide these funds, there will be millions more around the world who will suffer.”
The letter asked the G20 to target “people to help hide these funds” by the use of anonymous shell corporations. One G20 member where such shell corporations abound is the United States, where incorporations are done state-by-state, and where many of its states have weak or nonexistent laws regarding identification of who controls them.
Ahead of the summit, there were concerns that China would block implementation of so called “Beneficial Ownership” action plans – based on a statement by Beijing that this topic was only “still under discussion.”
But at the Brisbane meeting, China put no roadblocks in the way of the G20 issuing its communique.
“Countries should have a definition of ‘beneficial owner’ that captures the natural person(s) [real people] who ultimately owns or controls the legal person or legal arrangement,” the G20 statement said.
“Countries should ensure that competent authorities [including law enforcement and prosecutorial authorities, tax authorities, and financial intelligence units] have timely access to adequate, accurate, and current information regarding ... beneficial ownership," the statement continued.
The G20 statement said nations could create central registries of beneficial owners of corporate entities and can also address this issue through laws and regulations requiring financial institutions to verify the identity of those who control corporations.
Lack of 'any new ideas'
This position taken by the G20 breaks no new ground, according to some good-governance groups.
“While we welcome the G20’s focus on the problems that anonymous companies cause, the principles [set forth in the G20 post-summit communique on Beneficial Ownership] do not actually present any new ideas or policies for curbing them,” said Joshua Simmons, the policy counsel for Global Financial Integrity.
“In the past year, the European Parliament, the United Kingdom and Denmark have all moved toward implementing public registries of company ownership, setting a new benchmark for financial transparency. We’re disappointed in the G20 for declining the opportunity to meet that benchmark," Simmons said.
But others, such as Transparency International Australia, see the G20’s statement differently.
“G20 leaders have taken a concrete step to make it harder for the world’s corrupt to hide, with the adoption in Brisbane of new G20 High Level Principles on Beneficial Ownership Transparency,” the group said in a statement. “In 2011, the World Bank found shell companies were used in 70 percent of grand corruption cases over the last 30 years.”
But the group also pointed out what it considers to be a flaw in the G20 line - not making corporate owners and controllers publicly visible.
“We still maintain that the most efficient and effective way to share this crucial information is through public registers in all G20 countries,” said Maggie Murphy, a senior advocate for the group.
“Major countries including the USA, Germany and Australia still need to honor their existing commitments to clamp down. But the moral and political mandate for action has now been lifted to a new level," Murphy said.