Calls for greater corporate transparency in the U.S. are well-intentioned, but flawed, writes Martin Kenney
In his latest op-ed, for the Toronto Star, our Head of Firm Martin Kenney opines on the likely effectiveness (or otherwise) of the USA’s Corporate Transparency Act, which will create a beneficial ownership database and require the filing of beneficial information from 1st January next year.
With the International Consortium of Investigative Journalists (ICIJ) being the latest organisation to publicly cast doubt on the Act’s efficacy, Martin highlights several flaws: including, for example, that victims of fraud and corruption will be shut out of access to the register that the Act creates.
Meanwhile, in a 12-page letter earlier this year, the American Bankers Association and 51 state associations said that by barring banks from using ownership details for any purpose other than complying with customer due-diligence rules, and prohibiting them from sharing that information outside the US, the plan, as currently written and overseen by the Dept of the Treasury/Financial Crimes Enforcement Network, would make the database “practically useless.”
My view remains that access to highly sensitive company ownership information should be limited to law enforcement, tax authorities and, subject to a judge’s permission, private civil victims of fraud seeking to recover their stolen assets.
As it stands, the Corporate Transparency Act sensibly excludes public access to the company database it establishes. Access has been limited to law enforcement — once a judge signs off on a request. This has created another flaw: victims of fraud and corruption are shut out of access to the register. A discovery right to plaintiffs of civil cases should be permitted, with a judge acting as the gatekeeper.