On the 5th of December, the Fisheries Committee of the EU parliament will vote on the Fisheries Authorization Regulation; this will pave the way for the vote in plenary in February 2017. This regulation promises to be a major step forward in improving the management of all European flagged vessels in developing countries.
In particular, the FAR will raise levels of transparency, as it is proposed that it will maintain a central database of information on fishing authorizations, and it will make public data on which vessels are authorized to fish where and when. Yet discussions on this topic have led to disagreements over several key aspects. One of these relates to whether the list of data to be made public contains information on beneficial ownership.
This is a central issue relating to global efforts to address tax avoidance, corruption and money laundering - drivers of unsustainable fishing.
CFFA, and its partners in the European Union, believe that those making the final decision on the FAR must not lose the opportunity to make fisheries a leading example of transparency in beneficial ownership.
The problem of secrecy of beneficial ownership has been identified at the international level for several years. Arguably the most important indication of this came in 2013 when the members of the G8 made a commitment to compiling comprehensive data on beneficial ownership of their companies, and then in 2014, when members of the G20 adopted a ten point policy on how they will increase transparency of beneficial ownership of companies and trusts, including the commitment to establishing central registries.
Campaigners have argued that a weakness in the G20 policy was the absence of any commitment to public transparency. The global campaign for transparency on beneficial ownership is now strongly developed by numerous international NGOs, which was given massive impetus by the release of the Panama Papers. Some governments are already making commitments to this end, such as the Netherlands, Denmark and France who look set to establish comprehensive public registries with the details of the beneficial owners of companies registered in their countries. These countries, as well as Belgium, Spain, Germany and Greece are among 15 governments who are serving on the partnership panel for the global Financial Transparency Coalition, which among other commitments, aims to create full transparency on beneficial ownership.
A major obstacle to this development has been the norm, enshrined in various national and international legislations, on data protection rules. Yet arguments for publishing information on beneficial ownership have been based on the view that there are legitimate limitations to the rights of individuals to have their personal data protected from public disclosure. Indeed, this is well articulated by the Court of Justice of the European Union who stated (in the Schecke Judgment of 2010) that “the right to protection of personal data is not, however, and absolute right, but must be considered in relation to its function in society”.
Campaigns for complete transparency on beneficial ownership have been based on the argument that such is the scale of tax evasion, money laundering and financial crimes, there is now a clear public interest in ensuring beneficial ownership of companies is not kept confidential.
The EU’s response: The anti-money laundering directive
Transparency of beneficial ownership is also a key issue at the EU level, and is addressed in the EU’s Directive on ‘the prevention of the use of the financial system for the purposes of money laundering or terrorist financing’, commonly referred to as the EU’s anti-money laundering directive. This was revised in 2015, after two years of negotiations. One of the key points of discussion in the revision of the directive was the need to include stronger clauses on the issue of beneficial ownership. The proposal made in 2013 therefore contained a separate chapter on this, which included the need for all EU member states to establish comprehensive registries of beneficial ownership of their registered companies.
A sticking point was on the issue of access to these registries. What was considered unproblematic was that governments and competent authorities, including Financial Intelligence Units and law enforcement agencies, will have access to other country’s registries. But the extent to which these registries should be made public was again a matter of disagreement.
Remarkably, in March 2014, the European Parliament approved a version of the Directive that would have required every EU Member State to establish ownership registers that were fully in the public domain. Based partly on concerns about data protection, the European Council proposed a different version that restricted public access. Eventually a compromise was reached, and now the EU directive provides public access to information on central registries if a person requesting this information has a “legitimate interest”. The directive reads:
“Member States shall ensure that the information on the beneficial ownership is accessible in all cases to:
(a) competent authorities and FIUs, without any restriction;
(b) obliged entities, within the framework of customer due diligence in accordance with Chapter II;
(c) any person or organisation that can demonstrate a legitimate interest.
The persons or organisations referred to in point (c) shall access at least the name, the month and year of birth, the nationality and the country of residence of the beneficial owner as well as the nature and extent of the beneficial interest held.
For the purposes of this paragraph, access to the information on beneficial ownership shall be in accordance with data protection rules and may be subject to online registration and to the payment of a fee. The fees charged for obtaining the information shall not exceed the administrative costs thereof.”
This compromise has been disappointing for campaigners on transparency, because they argue it provides for sufficient ambiguity. States wanting to protect certain people may interpret the wording ‘legitimate interests’ somewhat narrowly. Nevertheless, it is important to establish in the context of current fisheries debates, that the EU has established that EU member states have to have central registries on beneficial ownership, and that any member of the public can access this data if they have a legitimate interest.
The FAR - not far enough?
The need to improve transparency of beneficial ownership in fisheries has been established for some time, and was recently reiterated at an international meeting on fisheries crime held in Paris, organized by the OECD and attended by numerous international and governmental organisations. The case is simple; whereas fishing vessels are vulnerable to prosecution, those ultimately profiting from criminal and unethical behaviors are often hidden from public scrutiny or criminal trials. Changing this must be the ambition of responses to fisheries crimes, to ensure that those who are responsible for a range of fisheries crimes, including tax avoidance, corruption, laundering of illegally caught fish through supply chains etc. are not immune from detection and prosecution, as they are now. Those committed to combatting illegal, unreported and unregulated fishing therefore agree that transparency of beneficial ownership on a global scale is essential. It is clearly in the EU’s interest to lead on this front and the FAR is the ideal opportunity.
However, in the EC proposal on the FAR, there is nothing on beneficial ownership explicitly, nor is this defined. Instead, the list of information to be submitted includes the name of the ‘economic operator’ of the vessel. What is more, in relation to providing public access to information held on a central registry by the EC, the FAR makes reference to EU directives and regulations pertaining to data protection laws. The EC proposal makes no reference to the EU’s anti-money laundering directive, which takes a different view.
Several NGOs involved in the negotiation have argued the FAR should increase public access to information held by the EC, including information on the ownership of the vessel being authorised. Implicit in this argument is that there is a public interest to this data, because fisheries is a business sector where considerable abuses stem from confidentiality of beneficial ownership information.
It is a moot point. The EU’s directive on anti-money laundering already obliges EU member states to compile central registries on beneficial ownership and to provide public access if there are no legitimate reasons to deny them this information. NGO campaigners on fisheries make take solace from this, knowing that they will be able to access information on beneficial owners of fishing firms through this legal route.
Unfortunately, it is highly likely that implementing the EU’s directive on anti-money laundering will take many years, whereas the implementation of the FAR could be quicker than this. It is therefore much better if the FAR followed the anti-money laundering directive and started with:
- including the obligation of EU member states to include information on beneficial owners (using the definition from the anti-money laundering directive) under the list of information to be submitted to the EC, ie the name, the month and year of birth, the nationality and the country of residence of the beneficial owner as well as the nature and extent of the beneficial interest held. and
- including a commitment to provide public access to this data, even if it contains the language of only doing so if a member of the public has ‘legitimate interests’ to this data.
Thus, at a minimum, the final text of the EU’s Fishing Authorisation Regulation should make explicit reference to the EU’s anti-money laundering directive and comply with this, therefore leading international efforts to achieve transparency in beneficial ownership in fisheries.