Ownership, Financial Accountability and the Law

Transparency Strategies and Counter-Initiatives

Paul Beckett

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429782008
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Contabilidad financiera

There is something visceral about ownership. This is mine; you can't have it. This is mine; you can share it. This is ours. Try to find it.

Contemporary literature and investigative journalism are showing that the scale of the problem of tax evasion, money laundering, organised crime, terrorism, bribery, corruption and gross human rights abuses is vast.

Ownership – specifically, the quest to identify beneficial owners - has been chosen by national and international regulators as the touchstone, the litmus test in the fight back. An owner by definition must possess something for which they are financially accountable. But what is meant by " ownership "? This book explains why ownership is pivotal to accountability, and what ownership means in common law, civil law and Shariah law terms. It looks in detail at State, regional and international transparency strategies and at an equally powerful global private counter-initiative to promote beneficial ownership avoidance through the use of so-called " orphan structures ". Where there is no owner, there is no accountability. The distinction between privacy and legitimate confidentiality on the one hand, and concealment on the other is explained with reference to commercial and trade law and practice, principles of corporate governance and applicable business human rights. This book introduces one further counter initiative: the phenomenon of transient ownership made possible through the use of cryptocurrency and the blockchain. The study concludes with a blueprint for action with recommendations addressed to states, international organisations, practitioners and other stakeholders.

1 Introduction

Why ownership matters

There is something visceral about ownership.

This is mine; you can’t have it. This is mine; you can share it. This is ours.

Try to find it.

Contemporary literature and investigative journalism show that the scale of the problem of tax evasion, money laundering, organised crime, terrorism, bribery, corruption and gross human rights abuses is vast.¹

1Many of the issues considered in this book are evolving rapidly, and wherever possible, I have selected research materials which can be accessed easily on the web. The economic impact analysis, the investigative journalism and the naming of names I leave to others. See the work of the International Consortium of Investigative Journalists – the Panama Papers <www.icij.org/investigations/panama-papers/> accessed 25 November 2018 and the Paradise Papers <www.icij.org/investigations/paradise-papers/> accessed 25 November 2018. Nicholas Shaxson’s work is a leader in the field – Treasure Islands: Tax Havens and the Men Who Stole the World (The Bodley Head, London, 2011) and The Finance Curse: How Global Finance Is Making Us All Poorer (The Bodley Head, London, 2018). See also Oliver Bullough Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back (Profile Books Ltd., 2018). A statistical and economic analysis is provided by Gabriel Zucman (Teresa Lavender Fagan tr), The Hidden Wealth of Nations: The Scourge of Tax Havens (The University of Chicago Press, 2015). On a commercial level, investor confidence in financial markets depends in large part on the existence of an accurate disclosure regime that provides transparency of beneficial ownership and control structures: Erik P M Vermeulen, Beneficial Ownership and Control (OECD Corporate Governance Working Papers, 18 January 2013) <https://doi.org/10.1787/5k4dkhwckbzv-en> accessed 25 November 2018. Useful websites for further study (all of which are referred to in this book) are listed in the Appendix to this chapter.

Ownership has been chosen by national and international regulators as the touchstone, the litmus test in the fight back. An owner by definition must possess something for which they are financially accountable. But what is meant by “ownership”?

The theme is why and, more importantly, how a super elite manages to own nothing yet benefit from so much. The why is easily understood: wealth, power and influence are addictive. The how is more difficult to unknot: legions of lawyers, accountants, tax and financial advisers are busying away combining elements, plotting charts and formulating strategies. In the opposing ranks, far fewer in number, compliance professionals attempt to match or thwart them, move for move. Somewhere in between stand the lawmakers and regulators and, to one side, the politicians.

The separation of ownership and accountability on the one hand from benefit on the other is not esoteric financial wizardry. The anonymisation of a super elite removes them from the day-to-day grind of society and can dull their social conscience. If you are a member of such a super elite, perhaps this book will be a whetstone. The rest of us have to care, because the manipulation of ownership and the avoidance of accountability are the means by which our well-being and sustainability are imperilled.

Long familiar structures, state sanctioned and created to meet the developing needs of commerce and society – trusts, charities, Wakf, foundations, corporations, partnerships – have not ceased to evolve, if for no other reason than that the needs of commerce and society have themselves not ceased to develop. Having existed for centuries, their very existence predicated on the desire to separate ownership from benefit, the legal DNA of these structures is being altered to serve darker purposes. The rise of cryptocurrencies and the blockchain have added to the complexity.

This book is arranged sequentially and best read as such, but each chapter is complete in itself and can be studied without first having had to study the others.

Chapter 2: What is meant by ownership?

Ownership is key to the transparency strategies – it is what those strategies aim to discover, in order to attach accountability to an owner. Yet from a philosophical and legal perspective, it is an enigma. The international, regional and national transparency initiatives all have the search for the owner at their core but do not appreciate the fluidity of the concept.

This chapter looks at what is meant by ownership in three legal systems: common law and equity, civil law and Shariah law. It poses the question whether “ownership” and “beneficial ownership” are capable of definition and, if so, whether that definition can be fixed and universal or must perforce be fluid and fragmentary. Applying theory to practice, what it means to be an “owner” of generic corporations, generic trusts, the Wakf and Foundations is explored.

Chapter 3: Disclos...