Monday, 23 October 2017

Osinbajo: Anonymous corporate ownership aiding corruption, terrorism




       Vice President Yemi Osinbajo says experience has shown that anonymous corporate ownership could serve as vehicles for masking conflicts of intereste, corruption, tax evasion, money laundering, and terrorism financing.

    The vice president spoke Monday morning in Jakarta, Indonesia, at the ongoing beneficial ownership conference of the Extractive Industries Transparency Initiative (EITI). Osinbajo said while aonymous companies are not always illegal or designed to harm, secrecy provides a convenient cover for the criminal and the corrupt.

     According to him, for developing nations, especially Africa, breaking the wall of secret corporate ownership is an existential matter; of life and death as masked or hidden corporate ownership is deeply implicated in the sad story of underdevelopment.  He cautioned that opacity in one section of the globe undermines openness in the other, stressing the need for all countries to break down this wall together as they are all at risk of the evil effects of opacity in business ownership. Osinbajo disclosed that Nigeria was still grappling with the negative consequences of the use of opacity by senior members of government and their cronies between 1993 and 1998 awarding themselves juicy contracts in the extractive industry. 
    
    "One of such incidents involving a company called Malabu Oil and Gas has been and is still subject of criminal and civil proceedings in many parts of the world involving huge legal costs while the full benefit of the natural resource remains unexploited for the benefit of the people of Nigeria to which it belongs. "We must be careful not to frame this campaign as a zero-sum between society and business. While governments and citizens stand to benefit from increased revenues, better law enforcement in this area should improve citizens’ welfare as a result of more ownership transparency. Many big businesses are equally concerned because most are legitimate and many have signed on to business integrity protocols such as EITI and the UN Global Compact.
  
     "Legitimate businesses benefit not only from the better business climate that results when governments better serve their citizens but also from knowing who they are doing businesses with or competing against, they benefit from a level playing field, lower costs of doing business, and from reduced reputational risks," he said. He stated: "A report that will be frequently cited in this gathering is the one by the One Campaign, titled the 'One Trillion Dollar Scandal.' The 2014 report claims that developing countries lose $1 trillion annually to corporate transgressions, most of it traceable to the activities of companies with secret ownership."Another report that may enjoy mention here is the 2015 report of the High Level Panel on Illicit Financial Flows from Africa chaired by former South African President Thabo Mbeki.  The panel stated in its report that Africa had lost over $1 trillion over a 50-year period and that Africa loses more than $50 billion annually to illicit financial flows. Most of these illicit flows are perpetrated in the extractive sector and through companies with hidden ownerships."

     Noting that on many occasions, companies had incurred hefty fines in their home countries for engaging in bribery and other unethical conducts, Osinbajo said hidden ownership and other underhand business practices could thus erode profitability and shareholder value. The vice president saluted the UK, Norway, Netherlands and Denmark for leading the way in establishing public registers of the real, human owners of companies in their countries, urging other G8 and G20 countries to follow suit. He, however, noted that current legislative measures in those countries might need to go farther to effectively discourage or totally prohibit non-disclosure agreements by governments with big corporates as well as to re-evaluate the use of secret trusts to hide beneficial ownership from the prying eyes of the law.

   He said Nigeria would remain on the board of the EITI and the ownership transparency train because they aligned with her priorities and would help to advance the electoral mandate of President Muhammadu Buhari's administration--fighting corruption, combating insecurity and growing the economy. Osinbajo concluded: ''As difficult as it may seem, establishing a publicly accessible register of beneficial owners of companies may be the easiest part. Making the register count will take a lot of work. It will be important to develop mechanisms to verify the data disclosed and to build the capacities of tax authorities, law enforcement agencies, media and civic groups and even citizens to wade through, interrogate, make sense of and use the data in the registers.

     "We also need to move away from the illusion of a magic bullet. In fact, there are no magic bullets in the quest for openness and governance reforms. Those who profit from opaqueness will not roll over. They do not have the incentives to do so.  "So, it is not inconceivable that as we are busy trying to break down the walls of corporate secrecy, they are also busy erecting new ones. So have no illusions that they will not devise grand schemes to game the system. In fact, they will try. Our task is to make it more difficult for them to hide or disguise the identities of real owners of companies to the detriment of the larger society. As with freedom, the price of openness will always be eternal vigilance."  

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