Respondent
...
www.transparency.org.au
info@transparency.org.au
+61 421 498 644
Level14
330 Collins Street
Melbourne VIC 3000
Australia
Beneficial Ownership and Transparency Unit
Market Conduct and Digital Division
Treasury
Langton Crescent
Parkes ACT 2600
Via email: beneficialownership@treasury.gov.au
TI AUSTRALIA SUBMISSION TO THE CONSULTATION ON THE
ENHANCED BENEFICIAL OWNERSHIP DISCLOSURE FOR LISTED
ENTITIES
Transparency International Australia (TI AUSTRALIA) welcomes the opportunity to make a submission to this
consultation on the enhanced beneficial ownership disclosure for listed entities.
We note the Bill would bring the Australian disclosure regime into line with markets such as New Zealand, the
UK, Hong Kong and Switzerland.
This important reform, publicly committed to by the government before the 2022 election and as part of
Australia’s 3rd Open Government Partnership National Action Plan 1, is long overdue. While the amendments
to the Treasury Laws Amendment Bill 2024 are welcome, we note that the most important update to beneficial
ownership transparency will be the creation of a centralised, publicly accessible beneficial ownership register
of companies and trusts. This update is not part of the current process and is instead proposed for the second
stage of the Government’s reforms on an as yet undefined timetable. The creation of such a register would
significantly increase the effectiveness of other recent anti-corruption reforms including the Anti-Money
Laundering and Counter-Terrorism Financing (AML/CTF) Amendment Bill 2024 and the Crimes Legislation
Amendment Combatting Foreign Bribery Act 2024. The Australian Banking Association has also indicated that
reliable, accurate and up-to-date beneficial ownership information would significantly improve their ability to
comply with their reporting regulations, reduce costs and it would also improve law enforcement’s ability to
investigate wrongdoing.2
Research from the United Kingdom shows that a public beneficial ownership register has resulted in significant
cost benefit to entities. For private sector users “The average value of the pre-reform Company Register
information is estimated to be around £4,400 per organisation per year for AML compliance activities. The
aggregate benefit for private sector users is estimated to be in the region of £170 - £460 million per year.”3
1
Attorney General’s Department, Australia’s Third National Action Plan, 2023.
2
Australian Banking Association, Consultation Paper: Increasing Transparency of the Beneficial Ownership of Companies, 2017.
3
Department for Business and Trade and Companies House UK, Value of Corporate Transparency in Tackling Corporate Crime. Policy
Summary. 2024.
ABN: 23 068 075 525
Transparency International Australia
We take this opportunity to reiterate the benefits of the centralised, publicly accessible registry approach which include:
• direct, timely and unrestricted access by competent authorities
• the ability of authorities to use the register for proactive investigations once they can freely search the
register and do not need to request specific information in a reactive manner
• more control over companies’ compliance with the rules, ensuring that beneficial ownership
information is effectively available
• no risks of alerting or tipping off companies/beneficial owners, as authorities do not need to request
the information and can access it directly
• more control over the type of information that is recorded and disclosed.
• more control over cases that could expose people at risk
• the ability to use the data for analysing money laundering risks and therefore improving policies,
supervision and enforcement
If registers are open to the public, the benefits are even greater:
• foreign competent authorities have direct access and will not need to resort to often lengthy
international cooperation requests
• obliged entities and other businesses can use the data as part of due diligence processes, to vet
business partners and suppliers, make decisions on investments, among other purposes
• other government bodies not directly tasked with anti-money laundering have access and can use the
information to detect conflicts of interest, fraud and other wrongdoing, including auditors, procurement
officials, competition authorities, anti-corruption agencies, election management bodies,
environmental agencies, among others
• civil society and journalists can scrutinise the data, revealing conflicts of interest and wrongdoing as
well as contributing to the accuracy of the data
We note the government’s staged approach to beneficial ownership transparency and look forward to the second stage of this process commencing soon.
TI Australia’s comments on the current consultation
We support the submission from the Tax Justice Network to the consultation, and provide the following additional comments.
We welcome the change to require foreign companies to follow the same rules on beneficial ownership disclosure that apply to domestic companies in order to invest in the country, including when opening a bank account or purchasing real estate. TI Australia would like to see this requirement expanded to include foreign
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trusts. We can see the merit of exempting listed Australian companies and wholly owned subsidiaries of those listed in certain approved regulated markets, unless more than 50% of its shares are held by another group which is not listed on an approved stock exchange. However, we note that the 50% threshold is arbitrary. A person can have control over a company because their shares give special rights under the constitution. The
50% threshold would also not apply to companies limited by guarantee. Therefore, a different threshold based on control should be substituted. We also question whether these exemptions will result in barriers to access of information if the foreign jurisdiction does not require the same access requirements as under Australian law.
We also welcome the amendments to strengthen the investigation and enforcement powers of ASIC to issue freezing orders where a person or entity fails to comply with substantial holding and tracing notices. This will incentivise compliance with disclosure obligations and allow ASIC to investigate potential misconduct or financial crime. This power will require additional funding and resources for ASIC to take on this role.
We support that the disclosure threshold in the Bill is 5% and urge that it not be increased to a higher level. We would support it being further lowered. We also note there are other ways to control a company than shareholding and that consideration should be given to identifying control by other means. Control can be exercised through voting rights, the power to appoint the majority of senior management, through positions held within the legal person or through informal means such as through close personal connections to relatives or associates.4
We note the proposed changes do not deal with entities other than companies and that this will likely result in displacement to other entities including trusts, captive insurance companies, foundations or other similar legal entities which in many cases are not registered with ASIC, but still allow bank accounts and other assets to be held anonymously and allow those holding such assets to avoid being named on the corporate register. We therefore recommend that the proposed changes are expanded to include trusts, foundations and captive insurance companies.
We note the proposed changes do not prohibit nominee shareholders. FATF recommendation 24 requires countries take measures to prevent and mitigate the misuse of nominee shareholding and nominee directors for money laundering and terrorism financing. 5 TI Australia’s position is that nominee shareholders and the non- disclosure of beneficial owners should be prohibited. At minimum, nominee shareholders should be required to disclose that they are acting as a nominee and the identity of the nominator. Appropriate sanctions should be implemented as a deterrent to the nominees including de facto or informal nominees.
We support that Part 6C.2 of the Bill will require listed entities to keep a register of information received through the tracing notices they have issued, or that ASIC has passed on from information obtained via ASIC-issued tracing notices. We welcome that the register must be open for inspection, but in our view the register will be
4
FATF, Guidance on Beneficial Ownership of Legal Persons, 2023.
5
FATF, Recommendation 24, updated November 2023.
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much less valuable if access is restricted to members of the entity, academics and journalists. Citizen oversight can be a positive source of valuable information to verify and update the register. In addition, the employment- based, rather than activities-based test for journalists and academics to access tracing notices may limit access to many professionals working in these increasingly casualised workforces that may not have an official affiliation with an academic institution or media company.
Yours sincerely,
Clancy Moore
Chief Executive Officer, Transparency International Australia
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