THE MISUSE OF CORPORATE VEHICLES

The issue

In today’s world, there is a growing need for all financial centres, wherever they are, to combat the abuse of corporate vehicles. The ever-present threat of terrorism and the ongoing exposure of corporate scandals demonstrate as much.

But action should be taken on the basis of facts, not prejudice

Unfortunately, limited and partial research by the Organisation for Economic Cooperation and Development into the misuse of corporate vehicles has been used to form policy by other organisations controlled by OECD members, such as the European Union and the Financial Action Task Force (FATF).

Unless it deals with problems among its own membership, the OECD will fail to tackle the issue of international criminality effectively. International regulation will only work if it is based on a level playing field.

The problem

In November 2001, an OECD report, Behind the Corporate Veil: Using Corporate Entities for Illicit Purposes, urged governments and regulatory authorities to ensure they could obtain information on the beneficial ownership and control of corporate vehicles in order to combat their misuse for illicit purposes.

The OECD’s proposals have serious implications for personal financial privacy and for the economies of many non-OECD countries.

Yet the OECD’s data is weak and the organisation is coy about turning the spotlight on itself.

The report only looks at countries outside the OECD. It virtually ignores such ubiquitous corporate vehicles as US limited liability companies (LLCs), Luxembourg 1929 holding companies and Swiss administered trusts.

The solution

The ITIO believes that new international standards must be rigorously based on fact. OECD members must be reviewed as much as non-members.

Together with the Society of Trust and Estate Practitioners, the ITIO commissioned international law firm Stikeman Elliott to plug the gaps in the OECD’s report

The resulting study, Towards a Level Playing Field: Regulating Corporate Vehicles in Cross-Border Transactions takes proper account of the major finance centres within the OECD.

For the first time, it provides a comprehensive analysis of the regulation of corporations, trusts and limited partnerships in fifteen OECD and non-OECD countries.

Towards a Level Playing Field reveals that leading OECD member states now actually lag behind regulatory developments in the principal non-OECD financial centres in important respects.

The results may come as a surprise to those who think big countries have nothing to learn from small ones.

By taking a global and inclusive view, Towards a Level Playing Field clearly demonstrates that the only way to develop new standards for corporate vehicles is to proceed on the basis of non-discrimination and a level playing field.

Otherwise, criminals may simply turn to those countries in the OECD itself where regulation is weaker.

Read more about Towards a Level Playing Field and download the full report.

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