The scourge of corporate secrecy

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Trillions of dollars in assets sit in offshore accounts across the world. Much of it is held in opaque shell companies and trusts, safely shielded from public scrutiny. Over the past decade, major data leaks and investigations — from the Panama Papers in 2016 to the FinCEN Files in 2020 — have put a spotlight on how the secret arrangements have abetted tax avoiders, money launderers and terrorist activities. The net has tightened. Still, many jurisdictions make it too easy for illicit activities to carry on with impunity by failing to adopt the highest levels of transparency: public beneficial ownership registers.

Open registers help legal experts, non-governmental bodies and journalists to quickly link money trails to named individuals and spot suspicious activity. In 2016, the UK took the lead by creating a compulsory public register of persons with significant control over companies. It subsequently gained commitments from its overseas territories, such as the Cayman Islands and British Virgin Islands, and crown dependencies to establish them. But many have dawdled and missed implementation targets.

The UK should use its influence to press for greater transparency. Ahead of a three-day joint ministerial council this week, where officials meet counterparts from the overseas territories, British MPs called on foreign secretary David Lammy to speed up efforts towards public registers. A Financial Times analysis also revealed that companies registered in the overseas territories exported $134mn worth of goods to Russia in 2024, in an apparent breach of UK sanctions. These territories and dependencies need to recommit to strict action plans to implement open databases.

The globalisation and digitalisation of capital means responsive cross-border co-operation on monitoring money flows is critical. In theory, international initiatives, led by the Financial Action Task Force and the OECD, have made progress in setting standards for law enforcement agencies to access company information on request. In practice, gaining international clearance is often challenging and cumbersome. That gives bad actors time to move their assets. Legitimate interest registers, which grant conditional access to investigators, can have similar drawbacks.

Major financial hubs, including the US and Switzerland, are also among the worst jurisdictions for enabling secrecy, according to the Tax Justice Network. In 2022, a European Court of Justice decision blocked the introduction of public registers in the EU. The decision has been cited by other jurisdictions as a reason not to push towards full transparency. New hubs are emerging too. The money tied to corruption, organised crime and sanctions evasion has shifted towards Dubai and Hong Kong.

The largest jurisdictions must lead by example, including by extending transparency efforts to trusts and other assets. As more areas adopt public registers, those that lack them risk tarnishing their image. The global push for transparency can also be boosted through technical assistance, particularly for those with less data expertise. Limitations on procuring from undisclosed entities, or even taxing payments made to them, might be explored as well. Exemptions could be provided for individuals who are at a genuine security risk.

Many favoured destinations for incorporation risk losing business if they open up to scrutiny — but economies that depend on secrecy are hardly built on strong foundations. Nations and territories can still compete by offering low taxes and light regulation. Using opacity as a unique selling point instead undermines tax collection, sanctions and anti-corruption efforts everywhere. A concerted push towards open-access data would make the financial system fairer, safer and stronger for all.