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Corruption more likely in secrecy jurisdictions, Parliament told

Thomson Reuters Accelus - Fri, 30 Nov 2012 10:21 GMT
Author: Compliance Complete
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By Martin Coyle So-called offshore secrecy jurisdictions make corruption more likely and have greatly contributed to the global financial crisis, MPs have been told. Daniel Balint-Kurti, a campaign leader at Global Witness, told a parliamentary committee hearing into money laundering and tax evasion in the Crown Dependencies earlier this week that secrecy jurisdictions had allowed companies and countries to build up unsustainable debt. He said that the UK's Crown Dependencies and Overseas Territories had some of the "worst" secrecy jurisdictions. "Around the world offshore secrecy makes corruption more likely," he said. Advantages for investors Balint-Kurti, who was speaking at an All-Party Parliamentary Group on Anti-Corruption (APPG) meeting, said that the secrecy jurisdictions, which were typically offshore tax havens, offered three opportunities for investors. The first, as the name suggested, was secrecy. The second was tax avoidance and tax evasion and the third was freedom from rules. He added that the jurisdictions allowed corporates the opportunity to hide the true nature of their ownership. "Secrecy jurisdictions affect transparency rules we have in place in our country," he explained. Balint-Kurti pointed to the Democratic Republic of the Congo, which he said had sold billions of dollars of its natural assets at knock-down prices to companies in secrecy jurisdictions. Balint-Kurti said that these companies then sold the assets on to extractive companies, which made huge profits from the deals. The people of Congo were being deprived while the unknown owners were "pocketing the money", the campaigner said. Balint-Kurti said that the UK had actually increased its development aid to the country while this had been happening. "It sits ill to see such a huge corruption scandal … occurring while the UK government not only increases aid but says nothing about it … I think this is an issue that needs to be addressed," he said. Openness on beneficial owners He called for the creation of public registries which would list the beneficial owners of companies. "Nominee directors and owners should have to declare themselves as such … regulators like the UK Listing Authority should not allow [companies] to list if they don't know who the owners are," he said. He said the UK needed to take a hard line and called for complete openness about beneficial ownership, noting that 70 percent of grand corruption cases involved companies with hidden owners. Joseph Stead, a senior adviser at Christian Aid, suggested that the UK should consider reforming limited liability companies (LLCs). Although he acknowledged the benefits of the corporate structure, he said that it was nevertheless subject to abuse. Lord Phillips of Sudbury agreed that action was needed on LLCs and said that they had become the "greatest tool for fraud" ever designed.

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