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G7, corporate beneficial ownership & environmental crime: a fig leaf?

Posted on 9 June 2021

On 5 June 2021, the G7 Finance Ministers and Central Bank Governors issued a communique following their virtual and in-person meetings in London on 4-5 June 2021. The communique has drawn attention because of its landmark agreement to reform the global corporate tax regime, but it is also notable for its comments on environmental crime enforcement – the document recognises the impact of environmental crime and commits the G7 to the implementation and strengthening of corporate beneficial ownership register as a measure to recover its proceeds. 

Beneficial Ownership

The communique sets out the following:

Environmental crimes have a serious impact on the planet’s biodiversity, generate billions of dollars in illicit finance and enable corruption and transnational organised crime. We agree that beneficial ownership registries are an effective tool to tackle illicit finance. We are implementing and strengthening registries of company beneficial ownership information to provide timely, direct and efficient access for law enforcement and competent authorities to adequate, accurate and up-to-date information, including through central registries. We further note the benefits of making beneficial ownership information publicly available where possible. We call on all countries to fully implement the Financial Action Task Force (FATF) Standards and strengthen them.

The focus on central beneficial ownership registers – a register setting out the ultimate beneficial owner of a corporate or other legal entity – as an effective anti-money laundering measure has been growing in recent years. The Financial Action Task Force first recommended the introduction of similar measures in 2012 to tackle money laundering or terrorist financing and its Guidance on the point sets out that the measures are required to allow 'law enforcement and other competent authorities to 'follow the money''.

As it stands, the G7 countries all already have legislation in place requiring registration of beneficial ownership, although some are more transparent or onerous than others and it follows that the commitment to strengthen the registration measures across the G7 may be the real impact of this communique in practice. For example, expanding the requirements to cover all corporates (regardless of size) or trusts, or making the register publicly available (which is the position the EU and the UK, but not the US), has the potential to shift international money laundering enforcement.

Environmental crime

Nevertheless, absent substantive reform of environmental criminal law and enforcement, it is not clear how strengthening registries of beneficial ownership will necessarily have an impact on transnational environmental crime, as claimed in the communique.

For example, in the UK, under the Proceeds of Crime Act 2002, the enforcement of money laundering requires the identification of a 'predicate offence' – that is, a substantive criminal offence which generates the proceeds of crime, which then form the subject of the money laundering offence. However, as previously examined, the UK legislative response to environmental crime is antiquated and environmental criminal offences are seldom (if ever) identified as a predicate offence for the purposes of bringing an international money laundering prosecution.

In reality, if the G7 is serious about meeting the challenge of environmental crime, then fresh thinking is required in order to target these harms directly through a more sophisticated enforcement response, including the creation of new criminal offences, with extraterritorial application, that recognise and respond to the scale of the problem.

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