A register of beneficial ownership won’t be perfect but is an idea whose time has come.
In a mineral-rich southern African state, a community is relocated 30 kilometres to make way for a new mine. Villagers are promised new jobs, schools and healthcare, but none of these materialise. The farmers are now too far from market to sell what few surplus crops they can grow on marginal, polluted, land, and undernourished children start to fall sick with diarrhoea.
The mine’s owner is apparently a north American company, but on investigation most of its shares turn out to be held by anonymous tiers of companies registered in London and British overseas territories. The national authorities show no interest in the matter; anyway the politically powerful mining minister is off visiting his cousin who has just bought a new villa.
On the Cap d'Antibes.
This composite tale of kleptocracy is compiled from numerous documented examples. They are powerful arguments in favour of identifying and making public who really owns companies.
Last week, the prime minister prompted cheers from transparency campaigners when, as the centrepiece to his speech to the Open Government Summit in London, he announced that UK companies would be required to identify all their beneficial owners on a central register - and that it would be made public. This would be a 'complete world first on transparency', he said.
Not everyone thinks that this is a good idea. The argument against requiring privately held companies to reveal lists of owners is that some shareholders have legitimate reasons for keeping their interests private and that criminals would be unlikely to comply. The register would become an additional bureaucratic burden making the UK a less attractive place in which to incorporate.
These points and others were well made in the Law Society's response to a government consultation on company ownership transparency over the summer: it was 'strongly of the view' that, if compiled, register of beneficial owners should not be publicly available.
The counter-argument is that a register is a vital weapon against tax evasion and other crimes, and that publishing it is the best way to make it credible. As David Cameron said, 'the more eyes that look at this information, the more accurate it will be'. A public register would also encourage shareholders to ensure their company behaved itself.
Answering questions the day after the prime minister's speech, business secretary Vince Cable suggested that the government would be flexible on some concerns. For example, shareholders with legitimate fears about being the target of terrorist attacks might be exempt from the public register, he said. However, while the government had considered the argument that publishing details of ownership might deter some from doing business here, it considered that demonstrating Britain's commitment to transparency might attract more.
I agree. Obviously there will be much devil in the detail, and one rock of enforcement will not stop the international torrent of misappropriated money flowing from poor to rich. However someone has to make a start. Robert Lowe, the father of the first modern company law, the Joint Stock Companies Act 1856, said: 'It is essential to give the greatest publicity to the affairs of companies, that everyone may know on what grounds he is dealing.'
Capitalism is a huge force for good in the world and is desperately needed in much of sub-Saharan Africa - but not if tainted with kleptocracy.
Michael Cross is Gazette news editor