As the Pandora Papers investigation hit the world’s headlines recently, we were proud to confirm that OpenCorporates was one of the data sources used by the International Consortium of Investigative Journalists (ICIJ) and their partners to verify companies mentioned in the 11.9m leaked documents.
Like everyone else, we have been reading through the series of high profile revelations uncovered in the documents, but frustratingly much of what the Pandora Papers highlighted about the global financial system is nothing new.
The misuse of corporate vehicles for nefarious purposes, such as to conceal ownership of assets via opaque offshore systems and anonymous shell companies, has been exposed time and again by numerous investigations and leaks, such as the Panama Papers, Paradise Papers and LuxLeaks. In many instances, the investigations noted that these activities, whilst ethically questionable, were not illegal.
The Pandora Papers is therefore (yet another) wake up call – reminding us of the urgent need for corporate transparency as a vital ingredient in a wider effort to uncover money laundering, tax evasion and other illicit or ethically questionable activity.
In this blog post, we’ll reiterate why open access to company data is a critical component to promoting corporate transparency and we’ll outline some key initiatives that, despite recently running the risk of stalling, could signal the beginnings of meaningful change – so everybody benefits.
We’ve also recorded a fantastic podcast with two members of the ICIJ team at the heart of the investigation – so watch out for this in the coming days.
Corporate transparency is critical
The Pandora Papers show how offshore corporate structures can be misused to obscure who owns or is linked to assets and companies. The secrecy they afford allows those with means to evade scrutiny from regulators, journalists or their own civil society.
The result is damaging for a plethora of reasons: it harms states’ ability to collect tax, compromises the integrity of financial markets, enables financial crime and creates a less trusted business environment – to name just a few.
Open & transparent data: vital to increase utility & drive change
The clear lesson is that we all must have the ability to find out what companies exist and who controls them – and it is fundamental that this visibility is available at a global level.
But this in itself doesn’t solve the problem. Company information must be made openly and easily available for all.
Traditional company data providers have always brought this information together, but this has only been available for those organisations that can afford to pay for their proprietary datasets. The cost of which is increased substantially when you consider how even some official company registers charge millions of Euros should you want to access their datasets.
By contrast, our public benefit mission is to make all our data openly available so that everybody – whether they are the general public, civil society or businesses – can access and easily search this crucial information.
It is simply not possible for civil society to understand and scrutinise the fundamental information about companies if the data is locked away behind a paywall or siloed in a state or country.
For example, by connecting 140 jurisdictions’ worth of company data from around the world and making it openly available, our users can interrogate the data in ways that wouldn’t otherwise be possible: such as a reverse company search of our data to identify companies across all jurisdictions with a given person as an officer.
Company registry data is not the only source of information needed for thorough investigations, but it is useful for:
- verifying key pieces of information contained in other documents, such as named legal entities involved in complex cross-border transactions
- identifying irregularities that would not otherwise be detectable if company data remained siloed into individual registries that could not easily be cross-referenced
As an example, the ICIJ said that as part of the Pandora Papers investigation, they “matched Panamanian companies from the Panama Papers data against data available for the Panama corporate registry on OpenCorporates” to identify changes in companies.
Data must also be transparent if company data is to be used with confidence. This means it needs a transparent line of sight back to the official source each datapoint was collected from – like OpenCorporates’ dataset contains.
Four changes we need now
At OpenCorporates we have campaigned for change to move the world towards a default of corporate transparency and openly available company data.
There have been encouraging developments towards the opening up of more company data from official company registries in recent years, but too often, proposals end up stalling and momentum is lost.
We are calling for the Pandora Papers to be the trigger that kick-starts or revitalises much-needed changes.
A good start would be the following four initiatives:
- EU Public Sector Information Directive and Open Data Directive
This is a positive step forward to open up data across the EU, as it identified company and company ownership information as high value datasets that should be made openly available. Following a stalled consultation process, it looks likely that a less progressive option may be adopted in practice. This would omit a lot of the crucial information that is needed.
- UK Companies House reform
Reforms for Companies House, which include allowing them to verify directors and information provided to them, have been working their way through the Westminster system. They aim to improve the quality and accessibility of UK company data, but the bill needs to be moved up the legislative calendar.
- Registration of Overseas Entities Bill
This UK bill proposes a new public register in which any non-UK companies seeking to buy property in the UK would have to disclose their beneficial owners. But since the draft legislation was published in 2018, it has fallen off the government’s agenda.
- US Corporate Transparency Act
The act held the promise of an ultimate beneficial ownership register for companies in the US. But this was quickly watered down so that the information would only be available to the Financial Crimes Enforcement Network (FinCEN), and not civil society at large. Similarly, if a financial institution wants to access this information on a potential customer, that customer must agree for them to have access. This lack of openness limits the utility of the information.
We hope that the global response to the Pandora Papers provides an opportunity to renew meaningful efforts to change the company data landscape for the better.
Whilst making company data openly available is not the only area of reform needed, it is a crucial and practical step towards promoting the transparency needed to shine a light on the offshore system, create a more trusted business environment and drive social good.