The EU’s Fifth Anti-Money Laundering Directive (5AMLD) came into force last week, on 10 January 2020. It was partly a response to the Panama Papers, a leak of thousands of documents from the law firm Mossack Fonseca which revealed the extent to which the true beneficial owners of companies can be concealed behind a complex web of offshore shell companies.
5AMLD requires member states to increase transparency by maintaining central registers of the beneficial owners of corporate entities (those who ultimately control a company). It will mean any member of the public will be able to access this information — a huge step forwards in corporate transparency.
But it is not enough. Until journalists, NGOs, corporate investigators and law enforcement can get access to the underlying data as machine-readable structured open data, many of those who use companies for illicit purposes will be able to sleep easy. They will be safe in the knowledge that the chances of law enforcement finding needles amid the haystack of millions of companies is vanishingly small.
For the data to be utilised effectively, it needs to be queried, analysed (such as the analyses conducted on the UK’s beneficial ownership dataset which identified significant data quality errors and suspicious entries), to be combined with other jurisdictions (so you can find anomalies and connections) and to be merged with other datasets like sanctions lists, politically exposed persons (PEP) lists and other data on companies and directors.
This then is the reason why White Box data, and official data that allows and supports this, is so important, as we discussed in our white paper The White Box Data Revolution last year. When it comes to combining datasets, or using data in due diligence, traditional Black Box data (with opaque data models, no provenance, proprietary identifiers, restrictive licences and poor data quality feedback loops) just doesn’t cut it.
That’s why countries must introduce registers where the underlying data is available as open data — and with it, create a genuinely hostile environment for the illicit use of companies.
We must learn a lesson from the Danske Bank money laundering scandal. Over $200 billion in payments flowed through the non-resident portfolio of Danske Bank’s branch in Estonia between 2007 and 2015, and a report commissioned by the bank found many to be suspicious. This activity was eventually exposed by a whistleblower. Subsequently, investigators using White Box data, including from OpenCorporates, identified many of the companies that were likely involved in the scandal. But the fact that the scheme happened for so long showed that the systems for detecting money laundering either weren’t working or weren’t able to utilise the data they needed to join the dots.
We are in danger of a similar situation happening under 5AMLD if the data is not provided in the right way. We must not fall into the trap of thinking 5AMLD has solved the problem. That’s why countries must introduce registers which are genuinely open – as they have the power to do under 5AMLD – where the underlying data is available as open data. In the process, they will create a truly hostile environment for the illicit use of companies whilst enabling a more trusted business environment.
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