Rebecca Lee, our Chief Impact Officer, recently spoke at the Legislative Briefing on New York’s LLC Transparency Act, just ahead of an amended version of the bill passing the Assembly Corporations Committee.
We at OpenCorporates support this Act, despite delays to the provisions that enable the beneficial ownership register to be available publicly and as open data, given it intends to end “the status quo of anonymous shell corporations that are routinely used for facilitating crime and money laundering in New York”.
Prior to the briefing, OpenCorporates provided consultative input to legislators – alongside letters of support for both relevant bills.
In this blog post, we explain the benefits of beneficial ownership registers to business and society, why we at OpenCorporates supported the Act and why New York needs to go further by making their beneficial ownership register publicly available as open data.
About the LLC Transparency Act
The Senate and Assembly bills (A9415 and S8439) were introduced to provide full transparency for the beneficial owners of limited liability companies in New York by:
- Defining beneficial ownership
- Requiring disclosure
- Publishing beneficial owners of limited liability companies in New York’s publicly searchable corporation and business entity database (*more on this component later)
Outcomes of the Legislative Briefing: Public access kicked into the long grass
The briefing explained that the bill (A9415) had been placed on the Corporations Committee agenda that day. It subsequently passed, where it now moves to the floor to be debated.
However, given various time and committee constraints outside of the Corporations Committee, the bill had been amended and some of the key components will now be introduced as additional standalone bills. Within the current bill is the definition of beneficial ownership and disclosure requirements for all domestic and foreign LLCs to the Department of State.
Unfortunately, the key component that the registry would be made publicly available (and downloadable) will now be part of a subsequent bill, as well as some other parts such as sanctions for non-compliance. Removing these aspects of the bill reduces the value it will offer society.
Although frustrating, we continue to support the revised bill given it will provide the essential foundations needed for a beneficial ownership register – having gained an understanding from the sponsors that they intend to pursue further legislation to make the register publicly available (and downloadable).
Transparency experts from a range of organisations contributed to the briefing, including: Transparency International (US), FACT Coalition, Open Ownership, OpenCorporates, Community Service Society and lawyers from the University of Buffalo School of Law, Civil Rights & Transparency Clinic.
All highlighted the wide ranging negative issues that anonymous companies bring and the urgent need for a beneficial ownership register to bring a range of benefits. These are not just limited to tackling illicit activities and financial crimes – but also include promoting effective government. Open Ownership talked about the 117 countries that have already committed to beneficial ownership registers, effective disclosure and emerging best practice.
OpenCorporates lends insight to the briefing
Given the amendments to the bill, Rebecca, our Chief Impact Officer, made two critical arguments:
- A beneficial ownership register has a legitimate public interest purpose; and
- Publishing the beneficial ownership register as open data expands its utility, significantly improves its data quality and maximises benefits to the economy
As extensive analyses, investigations and research have shown, companies are often the conduit for undertaking and concealing illicit activity, as well as laundering and spending questionable funds.
Owners of companies can benefit, influence, profit and control a web of other companies, yet enjoy “limited liability” and can remain anonymous. As a result it is difficult to identify the true individuals directing or benefitting from that company – whether that investigation relates to sanctions, asset ownership, money laundering or a wealth of other suspect or criminal behaviours.
Therefore, understanding who controls and benefits from companies is critical to ensuring a fair and transparent society. This is why 90% of the countries committed to beneficial ownership transparency have committed to a public register.
Rebecca argued that many stakeholders in business and society have an interest in knowing the ownership of companies, including:
- Law and tax enforcement agencies
- Every business who needs to undertake due diligence on clients, manage their supply chain or third parties or needs to provide their own companies’ beneficial ownership information to others
- Those looking to understand issues such as government procurement, political financing or the ownership of land, real estate or other high value assets – such as yachts or artwork
- Civil society interest is extensive – from consumer protection groups and creditors, those combating human trafficking and modern slavery (e.g. Stop the Traffik) through to those who want to understand who is financing deforestation (e.g. Trase Finance)
- Every member of the public thinking about renting from, buying from, or otherwise interacting with a company. Consumers provide not just money but also data about themselves as individuals to hundreds of companies a day – shouldn’t you know who is benefiting from it?
Rebecca explained that the gold standard of company registers is open data. This means that the data in it is made available: for free, in machine readable formats, up to date and with an open license that does not restrict its usage.
Experience and research (such as that taken by UK Companies House and Open Ownership) shows that open data registers:
- Ensure easy and efficient access for everyone
- Increase the ability (and reduce the costs) for companies to fulfil due diligence and risk management requirements and to conduct investigations
- Provide the crucial ability to gain insight by combining ownership data with other datasets such as sanctions, PEPs, procurement and other company or asset registers
- Allow analytics to be conducted across all records at once – which can identify suspicious patterns of owners and where relationships exist across layers of multiple companies, individuals and addresses. This enables research and investigations that would not be possible by manually searching each record
- Enable wider, more in-depth analysis, increases feedback, challenges and overall data quality
Overall: a positive step forward – but the data must be made openly available
We applaud New York for moving this legislation forward.
New York has seen the importance and demonstrated its commitment to open data. The Open NY Data Portal includes downloads of Active Corporations made available by the Division of Corporations, which already has safeguards and mechanisms in place to manage privacy issues for those who should be protected – such as the Address Confidentiality Program.
We will continue to liaise with legislators however to advocate for the beneficial ownership register to be made publicly available.
You may also be interested in…
- Our mission
OpenCorporates’ mission is to deliver genuine corporate transparency – collecting and making public data on the existence, ownership and activities of companies, and the people connected with them, for the benefit of business and society. Our data supports governments, regulators, civil society and the public and supported investigations from the Panama Papers to exposing the exploitation of the Paycheck Protection Programme.We have pioneered the campaign for open company data, advising governments, organisations and company registers.
Find out more >
- Illinois commits to open up its company data
We interview two Illinois politicians about why they chose to open up access to their Secretary of State data.
Read interview >