One year on, government planning four new registers to reveal company owners

Registries listing the real owners of companies, trusts and foundations, promised last year by the Prime Minister are still in the making, MaltaToday has learnt.

Joseph Muscat had pledged to introduce the registries at an anti-corruption summit called by then British Prime Minister David Cameron in the aftermath of Panama Papers.

The registries of ultimate beneficial owners are a requirement of the EU’s 4th Money Laundering Directive – dubbed the 4AMLD – which Malta is transposing piece by piece.

But more than a year after Muscat attended the London summit, proposed changes to money laundering legislation currently before Parliament make no mention of the registries. The changes transpose only part of the directive.

Shadow minister Mario de Marco pointed out this failing last Monday when talking about the proposed amendments, which focus exclusively on bolstering the Financial Intelligence Analysis Unit.

“As we speak, we have no idea how and if the government intends to transpose the requirement to set up a public registry of ultimate beneficial owners,” de Marco said when contacted.

However, Finance Minister Edward Scicluna told MaltaToday yesterday the rules associated with ultimate beneficial owners were being drafted and would be transposed in four new sets of regulations.

He said the plan was to have four registers dealing with ultimate beneficial owners of companies, trusts, foundations and associations.

“These are in the final stages of drafting and should be issued for a brief period of consultation shortly. Then they will need to be published by legal notice,” Scicluna said.

The legal notices will introduce registers of real owners under three different laws: the Companies Act to deal with companies, the Trusts and Trustees Act to deal with trusts and the Civil Code to deal with foundations and associations.

Scicluna said the Bill being debated in Parliament proposed changes to the Prevention of Money Laundering Act, specifically dealing with the FIAU.

Regulations emanating from the law will also be amended to transpose other parts of the directive.

Registries to identify the ultimate beneficial owners of companies and trusts are necessary to lift the veil of corporate secrecy prevalent in financial services.

Companies and wealthy individuals use nominee companies to hide their identity. In instances like this, the names of the real owners will not crop up in public registries such as the Malta Financial Services Authority’s registry of companies. While the use of nominee companies is not illegal and there may be perfectly legitimate reasons why people resort to them, they are often used to hide criminal activity.

In the wake of the Panama Papers revelations last year which exposed the secret dealings and tax avoidance strategies of wealthy individuals, and the more recent Paradise Papers, pressure has been mounting for greater transparency in the financial services industry.

Muscat had told the London seminar last year his government was committed to establish a central register of company beneficial owners for companies incorporated in Malta, and to exchange information of beneficial ownership in line with EU directives that were to come into force in 2017.

The Prime Minister’s declaration at the time came on the back of national outrage back home following news that then energy minister Konrad Mizzi and the Prime Minister’s chief-of-staff Keith Schembri had set up offshore companies in Panama shortly after the 2013 election. The new EU anti-money laundering directive calls for the introduction of a central register of ultimate beneficial owners, who can be persons or corporate entities that own over 25% of shares. 

The register will be accessible to the public when they can demonstrate a “legitimate interest”.

In case of trusts, member states must provide a central UBO register accessible to competent authorities, but not to the public. UBO-information will include the identity of settlers, trustees and beneficiaries.