Beneficial ownership transparency : enhancing the current Maltese framework

Abstract

Legal entities and legal arrangements have served as vehicles for Money Laundering for decades. Their attractiveness stems from the fact that they allow criminals to create layers of opacity between themselves and the proceeds of their crimes. Some of the most frequently used tools in achieving this goal are complex, multi-jurisdictional structures, shell companies, formal and informal nominee shareholders, and the exploitation of professional intermediaries such as lawyers, and Trust and Company Service Providers. The ‘Panama Papers’ and ‘Paradise Papers’ scandals in the second half of the 2010s, shed a light on the prevalence of such practices and forced the issue to the top of the European Union’s agenda. In tackling this issue, the prevalent opinion has been in favour of increased financial transparency, more specifically the identification and verification of ‘ultimate beneficial owners’ (UBOs), these being the natural persons controlling the legal entities and arrangements in question. Various institutions have endeavoured to provide a definition of ‘beneficial ownership’. However, the concept remains shrouded in confusion and the misidentification of who qualifies as a UBO remains prevalent. This study underlines the importance of a substantive approach towards defining this concept and proposes recommendations as to how the definition currently in force at a European Union and domestic level can be improved. Furthermore, as per the recommendations of the Financial Action Task Force and the requirements of Directive (EU) 2015/849 as amended by Directive (EU) 2018/843, Malta has adopted a multi-pronged approach towards ensuring that ‘adequate, accurate and up-to-date’ beneficial ownership information is available to the relevant authorities and institutions in a timely manner. An analysis of how these mechanisms operate within the Maltese context is undertaken, through which the various obligations of the State and of private entities are explored. This study also makes various technical and legislative recommendations as to how the legal regime in force can be ameliorated. These include, amongst others, investing in advanced technologies, fostering a culture of compliance amongst businesses, and standardising domestic, European, and global central registers of beneficial owners.