Before buying an offshore, potential buyers usually compare the conditions of various vendors - so to speak, “ask the price”. At this stage, many people have the same questions: why are the prices for classic offshore companies so different? In fact, the cost of registration of such a company on the sites of competitors may be 5-10 times different. A tempting low price for an offshore company did not forebode good before, and the situation had worsened over the past year and a half to such an extent that at present, such a purchase might result in criminal prosecution. In this blog, we’ll figure out what forms the price of the offshore, how the sellers manage to reduce it and how relevant is the proverb about “cheap fish” and “bad broth”.

What is included in the cost of an offshore company?

The real offshore price consists of three important components, such as:

  • Required minimum (cost price). This includes the registration of the company in the state register, payment of state duty, a basic package of documents, registration of the registration address, opening of an account in a local bank, international sending of documents and other mandatory procedures.
  • Additional conveniences. In addition to the aforementioned minimum, the customer may need other services - for example, site creation, virtual office, nominal service, etc.
  • Work of specialists. Competent individual approach of the company involves the selection of jurisdiction taking into account your needs, preparation of documents, consulting with foreign registrars and banks. All this requires time and material costs, and therefore, appropriate payment. At the same time, the higher the quality of service and the level of security, the more justified is the high cost of the company’s services.

Miser pays twice: why can you overpay with a cheap offshore?

If a small discount (up to 30%) can be explained by special arrangements between agents or the absence of a nominal service, then obvious cheapness should cause fear. As we have explained above, the formation of the price is quite reasonable and obvious. If you neglect any of the components, you will acquire a non-working tool, and serious problems with the law. Let’s take a closer look at how the sellers manage to reduce the price of a real firm. There are several “classic” situations associated with the purchase of a cheap offshore.

  1. One offshore - several owners. The low cost of an offshore company can be explained by its simultaneous sale to several customers. The last ones do not know about each other and use the offshore calmly, until one of them has problems or issues with the tax authorities. Today, such frauds are quickly revealed and therefore they are extremely rare. However, outspoken scammers, who do not care about their reputation, do it nowadays.
  2. Incomplete package of documents or services. As indicated above, the preparation of documentation is included in the cost of the offshore. However, after payment, it often turns out that some important documents are not included in the declared low price. For example, a bank may require a Good Standing certificate, which the offshore seller will notify the customer about post factum, asking for an additional fee for processing the document. The registrar can also neglect the confidentiality of the customer, for the sake of economy, and, instead of registering a company for a nominal shareholder, issue shares directly in the name of the owner.
  3. Unprofessionalism of agents. The registrar can significantly reduce the costs by recruiting a novice or an inexperienced specialist working according to a “template”. At the same time, neither your wishes nor changes in the legislation, nor the new requirements of the selected jurisdiction and bank will be taken into account. For example, you can buy an offshore company in Panama without being informed that a reporting requirement has been introduced in the country recently. In the absence of an individual approach, the tasks arising in the process, namely, the appearance of a request for additional documents, interaction with government agencies, changes in life circumstances, etc., are not solved or are ineffective.
  4. Poor nominal service. In order to make an impression of offshore as a real company, the nominal employees should be in touch, respond promptly and efficiently to requests, sign documents, etc. If this is not the case, the enterprise causes suspicion. Today, the widespread use of the same nominal employees in many companies is quite common. If desired, it is easy to verify, especially if there is an online service that allows you to find all the companies in which he holds the position of director (as in the United Kingdom). In order to maximize the price of a service, the fraudulent companies may resort to using the following instead of a professional value:
    • documents of dead or non-existent persons;
    • persons without a fixed place of residence;
    • unauthorized persons without their knowledge.

    It goes without saying that in such cases the documents are falsified. The first official request to the company will entail problems with law enforcement agencies.

  5. Fraud on reporting. This turn of events is the most dangerous for the client. Most jurisdictions have certain reporting requirements now. Most often, the machinations are carried out in the states where there is a complete (active) and so-called “simplified” (passive) reporting system. The latest option is much cheaper, but it is suitable for a certain list of companies. What pitfalls can a buyer expect? First, the client may simply not be notified of the need to report or even assure in the absence of such a requirement. The consultant can also include full reporting in the cost, and, in fact, submit passive one, although the company is quite active. Such “skeletons in the closet” are discovered sooner or later, and on one “fine” day, the owner of the offshore will receive a notification from the tax service or other inspection service.

How to protect yourself and your business when buying offshore?

Even if you do not take into account scammers, too cheap jurisdictions are dangerous because of their bad reputation. One of the first problems that you will face is the inability to open a bank account. In addition, underdeveloped countries do not provide proper IT protection, so hacking their vulnerable systems and sites for experienced fraudsters is a simple matter. If you care about your reputation, do not neglect the authority of the jurisdiction when buying offshore. Over the past few years, the trends in the offshore market have changed: legislation has become tightened, many countries have begun the automatic exchange of financial and tax information and have introduced open registers of beneficial owners. Compliance with the new standards has allowed the states to maintain an international reputation, but they are forced to raise the requirements for the registration of companies, conduct due diligence, request additional documents, introduce new registers and so on. All this is associated with higher costs, and, ultimately, with an increase of the cost of opening a company. In view of the above, the client must soberly assess the situation on the market and do not expect that he will receive “all inclusive” for $ 500 without a bunch of problems with the law in addition.

Following the introduction of a public register of persons with significant control for the British companies and LLP (from April 2016), as well as for the Scottish partnerships (since June 2017), some British dependent territories, under pressure from the UK itself, have created similar registers / databases. However, these centralized registers will be closed, and the access to data from them will be available only to the British competent authorities and only upon request. This decision has become a compromise after many years of negotiations and frictions, since the overseas territories, although partially subject to the law of Great Britain, are still self-regulatory. On the one hand, access to these closed registers / databases will enable the UK law enforcement agencies to monitor tax evasion, as well as terrorists and criminals hiding behind the anonymous companies. On the other hand, this will put an end to the requirements for the introduction of open registers of beneficiaries in the countries partially controlled by Great Britain. Among such states are the Cayman Islands, the British Virgin Islands, the Isle of Man, Bermuda, Guernsey, Jersey, and others. As the British Virgin Islands (hereinafter - the BVI) are the most popular with our clients among offshore jurisdictions, we will consider legislative changes in connection with the agreements reached with the UK.

So, after the exchange of official communications between the governments of the BVI and the UK on June 12, 2017 the Law on Beneficial Ownership Secure Search System (hereinafter - BOSS) was adopted, and from June 30, 2017, it came into force. In accordance with this law, at the moment, the work is in progress on creating a central database (server) on the BVI, which will contain all the information and supporting documents about the beneficial owners of all corporate entities and legal entities registered in this jurisdiction. This database will be used to facilitate the effective transmission of information on the ultimate beneficial owners by the competent BVI authorities at the request of an authorized law enforcement agency of the United Kingdom.

The beneficial owner in the BOSS Act is defined as a natural person who ultimately owns or controls directly or indirectly 25% or more shares or voting rights of a legal entity. It should be noted, that, however, there is a threshold of 25% or more for the purposes of the BOSS legislation for claiming a report on a beneficial owner, in other BVI legislation, on combating terrorism and money laundering, it is set of more than 10%. This means that the registration agent can request information about all persons who control more than 10% of the company’s shares. The information about the trustee or other person who controls these legal relationships is subject to disclosure, as well as information about the founder or another person with whom a nominal agreement is concluded.

The BOSS Act allows each Registered Agent to create its own databases for storing information about the ultimate beneficial owners of legal entities, which, in turn, will be available to officials of one of the following authorized competent authorities:

  • Financial Investigation Agency;
  • Financial Services Commission;
  • International Tax Office;
  • Chamber of Attorney General.

The BOSS Act requires to provide the following information for each beneficial owner:

  • name;
  • address of residence,
  • date of Birth,
  • citizenship.

The requirements for storing information in BOSS are also listed in the Law. The requirements for the relevance of data in BOSS are also established. The companies are required to notify the registered agent of any changes in the beneficial ownership or the information about the beneficial owners provided by law for filing, within 15 days from the receipt of information about such changes, indicating the date of these changes. After this, the registered agent must take all necessary steps to update the BOSS system within 15 days after receiving the notice of the changes.

Strict penalties are imposed on both companies and registered agents for non-compliance with these requirements. Strict punishment for registration agents (fine or imprisonment) is also provided for provision of knowingly false information concerning a corporate legal entity, since this is considered a crime. In conclusion, we note that the BVI has concluded a number of agreements on the exchange of tax information with other countries. In addition, information on beneficial owners has always been available to competent authorities that have submitted a proper request to the relevant BVI body. And this means that BVI, like other offshore jurisdictions, are moving towards transparency with long strides, and the offshore companies are gradually losing their anonymity.

What is important to know when choosing a foreign bank in 2018

Recently, an increasing number of citizens, concerned about their future, the future of their family or business, face the issue whether it is possible to open an account in a foreign bank and what is required for this? Which bank to choose for this: European, offshore bank, etc.? Historically, (and sometimes it is quite justified) the trust to a foreign bank is higher than to local institutions, and obtaining, for example, a loan is possible on more favorable terms than in Ukrainian banks, moreover, many people wish to keep the confidentiality of their actual income.

Regardless of whether you want to open a foreign bank account online in offshore or onshore jurisdictions, a number of aspects need to be considered and analyzed when choosing a bank. That is why the company Finance Business Service works with more than 100 banks around the world. We ask only really necessary questions in the process of selecting banks for our clients.

The current situation in the banking shows that financial institutions are increasingly facing problems of unexpected loss of correspondent accounts in US dollars. In general, the US is only a part of the global pressure on the international banking sector, we should not forget about the OECD program on automatic information exchange, and about the guidance of the BEPS. The complexity of automatic exchange for international banks is not only in the risk of losing a significant number of customers, but also in understanding what and whom to provide as part of the exchange. Tension in the banking sector is clearly traced through the complication of the procedure of opening accounts and building of long-term cooperation, directly influenced by the financial regulators of international banks.

In such a situation, real risk diversification is possible only if you have a spare foreign bank account. It is worth mentioning the risks of owning a bank account in only one country. The vivid examples are the hacker attacks on financial institutions of different countries, the volatile policy of central banks, often aimed at reducing the number of financial institutions in the country, etc. The main criteria for choosing a bank

  1. Before choosing the most suitable bank for opening an account, first of all, you should determine the goals that you need to achieve using this account. They can be very diverse:
    • Saving of personal funds;
    • Private investment of private funds;
    • Earnings on the Internet or online commerce;
    • Sale of goods and services to foreign partners, etc.

    If the purpose of opening an account is a standard commercial activity with a large number of incoming and outgoing payments, then the most important criteria for choosing a bank will be the speed of the transfers carried out by the bank and the convenience of managing the account; in particular - the availability of a remote account management system (Internet bank), as well as the average cost of one transaction. It is also important to clarify whether the bank is working with the list of currencies you need. In the case when the main task of opening an account is to keep the financial resources already earned by the entrepreneur, usually attention is given to the bank’s reliability rating. The interest on the deposit will be relatively low in the banks of high reliability category (“AA” and higher), which is due to the conservative investment policy of the banks of this group. If an entrepreneur raises the issue to make his free funds, untapped in the main business, continue to “work”, creating additional income, then one should consider the option of opening an account in one of the investment banks that place client’s funds professionally in international stock markets, getting relatively high interest income.

  2. Is it necessary to visit a bank to open an account? Many customers prefer to open an account without going to the bank. Opening of accounts is possible remotely, subject to certain requirements of the bank. In addition, in some cases, you should be prepared for the possible need to meet with a representative of the bank in Kyiv or in one of the regional offices of the bank, for example, in Europe (depending on the bank).
  3. Tariffs, cost of service, availability of necessary bank products When analyzing tariff rates, it is necessary to pay attention to the availability of additional bank commissions, for example, for considering a package of documents for opening an account, etc. At the same time, it is important to clarify the fate of these resources, if the bank refuses to open an account - as the tariffs of banks may specify that these commissions are not returned. The banks of Europe (Liechtenstein, Switzerland, Austria, etc.), being respectable and reliable - mainly refer to savings banks. Tariffs for their services are much more expensive than in commercial banks with a priority rate for conducting banking operations. The availability of certain bank products may sometimes become a key factor when choosing a bank. Some banks offer cards that do not contain the owner's name, some cards require special transfer from the account, others are attached directly to the account, etc. Brokerage accounts will be necessary for transactions with securities, FOREX-accounts - for the operations in foreign currency markets.
  4. Do you want to give minimum information about yourself and your business to the bank? The general trends in the world financial system are such that now almost all banks request a lot of detailed information about the business and its ultimate beneficiaries. Banks are forced to comply with the requirements imposed on them by law, otherwise they can incur catastrophic amounts of fines, remain without a license ... The list goes on. Be very careful if your counselor / lawyer recommends working with the bank, arguing that “this bank does not ask anything”. There is a big risk that then you will look for the specialists to return your money earned for years of hard work.
  5. Bank secrecy. If this is one of the main criteria for you and your business, then, on choosing a bank:
    • pay attention to the international agreements of the jurisdiction in which the bank you are interested in is registered, about mutual assistance and the provision of information to other countries;
    • choose a country with high standards of bank secrecy and strict laws regarding the disclosure of bank secrecy (Switzerland, the Cayman Islands, Hong Kong, Singapore, etc.)
  6. The availability of personnel with the knowledge of the Russian language, Russian-speaking Internet banking, technical support in Russian. This is an important point for many customers.


We wish to think, when preparing to become a client of a foreign bank, a potential client chooses his own bank himself. But the reality is that everything is exactly the opposite in banking for non-residents. The bank always makes a decision to open or not to open a bank account for you as non-resident. And it will not risk the existing customer base, the license, the freedom of the bank’s executives and the Compliance officers, because they are responsible (up to their freedom) to ensure that risky and problematic clients not to be included in the number of bank’s customers. Banks have their own and often quite vague list of characteristics that should be initially inherent to a potential non-resident client.

The company Finance Business Service is ready to help you and take painstaking and extensive work on itself. We suggest answering the questions of a specially designed brief for the professional choice of a foreign bank to open an account. It includes a number of issues, best adapted to the general banking standards and requirements. Based on the answers provided, we analyze and select the most suitable financial institution in accordance with your goals and plans.


By registering a company abroad with the help of Finance Business Service, you receive special tariffs for the package of services, while the standards of the constituent instruments of the companies registered by us meet the strictest requirements of international banks. Thus, the documents will be ready for immediate submission to the bank you need.

On January 31, at the meeting of the Ukrainian government, it was decided to exclude 5 countries from the list of offshore companies, namely Estonia, Latvia, Georgia, Malta and Hungary.
We remind that on January 19, the Ministry of Finance of Latvia announced that the inclusion of this country in the list of offshore zones was unreasonable.
Earlier, Ukraine included Estonia in the list without notification of the Estonian government, so the Prime Minister of the state Jüri Ratas reacted by a statement on the need to remove the jurisdiction immediately from the offshore list. It took place on January 26, during his meeting in Davos with the Prime Minister of Ukraine Vladimir Groysman and the Minister of Finance of Ukraine Aleksandr Danilyuk.
In total in 2017, Ukraine expanded the list of the countries, the operations with counterparties of which are subject to control in the administration of the law of transfer pricing, to 25 countries. Guadeloupe, Guatemala, French Guiana, the Commonwealth of Dominica, the Dominican Republic, Estonia, Iran, Cuba, Laos, Latvia, Lebanon, Mauritius, Malta, Morocco, Monaco, the United Arab Emirates, Singapore, Georgia and Hungary were added to the list. At the recent meeting, Latvia and Estonia called for their exclusion from the Ukrainian offshore list.

The NBU has forbidden financial institutions to apply the requirements of the Regulation on the procedure of analysis by the banks and verification of documents (information) on financial transactions and their participants (Resolution No.369) to the transactions, one of the parties of which are persons registered in the offshore zones.
On January 24, the financial institutions received the corresponding Clarification No.25-0008/4731, signed by the director of the financial monitoring of the National Bank of Ukraine, Igor Beryoza. The document was sent out in the form of an electronic message.
The letter states that from January 1, 2018 banks should not define such operations as risky ones, which means they are not required to conduct additional checks and request the documents from the clients.
This change is justified by the fact that the order of the Cabinet of Ministers, effective from September 16, 2015, with which the list of offshore countries and territories was enshrined, lapsed at the beginning of this year. At the same time, the updated list, determined by a separate order, was not included in the relevant resolution of the National Bank.
In other words, the list of offshore zones still exists, but the NBU rules, which oblige banks to closely monitor such operations, send the financiers to no longer valid list. At the same time, the message does not explain why the NBU made offshore transactions out of control. Moreover, there is nothing in the letter about the intention of the regulator to amend its rules, including a reference to the updated list of offshore companies.
We remind that, according to the rules of the National Bank, financial institutions should have referred the transactions to risky ones, one of the parties to which are registered natural persons and legal entities in offshore areas. Such operations should have been subjected to additional checks with clarification of their essence, purpose, conformity to the type of the activity of the participants and economic feasibility. In addition, banks were required to establish the ultimate beneficiaries of the companies and sources of origin of funds.

On January 24, 2018, another six states signed the Multilateral Convention for the Implementation of Activities under the BEPS Plan (MLI Convention). In this regard, the countries were able to amend promptly their agreements on avoidance of double taxation, taking into account the recommendations developed by the OECD in the framework of the plan of action to counteract the base erosion and withdrawal of profits from taxation.
Barbados, Côte d'Ivoire, Jamaica, Malaysia, Panama and Tunisia joined the MLI Convention, after which the total number of signers reached 78.
It is also worth noting that Algeria, Kazakhstan, Oman and Swaziland have announced their intention to sign the Convention in the near future. In addition, other jurisdictions are actively working on signing the agreement in June this year, as the press service of the OECD reports.
To date, four jurisdictions - Austria, the Isle of Man, Jersey and Poland - have ratified the Convention, which will enter into force three months after the fifth part of jurisdictions transfers the instruments of ratification to storage.
The Convention, developed as part of large-scale negotiations involving more than 100 countries and jurisdictions, is designed to allow the countries to include promptly the proposed amendments into their tax agreements without necessity to review individually the last ones on a bilateral basis.

In connection with the entry into force of amendments to the Law on Commercial Companies of 2004 (as amended in 2005), since January 1, 2018, the official fees have been increased in the BVI, levied from business companies in the Register of Corporate Affairs. These changes were adopted and published by the Government of the British Virgin Islands at the end of 2016. Initially, it was assumed that the amount of official payments will be increased from July 1, 2017, but in March of last year, the entry into force of the changes was postponed until January 1, 2018.
The increase in the amount of following payments is among the most notable changes:

Accordingly, the fines for late payment of annual fees have also been increased, since they are set as a percentage of the annual fee. The amount of payment for the restoration of the company in the Register has also been significantly increased.
Some new duties have been introduced, including:

  • for the primary registration of a copy of the register of company participants;
  • for registration of changes in the register of participants;
  • for registration of an application for consent to use a limited in the use word or a phrase in the title;
  • for registration of an application for the use of an additional foreign name;
  • for registration of an additional foreign name;
  • for registration of an application for the deregistration of an additional foreign name;
  • for registration of an application for the change of the name or additional foreign name;
  • for notification of a decrease in the share capital;
  • for filing with the Register of the Judicial Act;
  • for filing an annual report of a foreign company;
  • for issuing a certificate confirming the information about the company from the Register or the status of the company.

The European Union excluded 8 countries and territories from the “black list” of offshore zones, as it was reported on the official website of the Council of the European Union on January 23. The following countries were removed from the list: Barbados, Grenada, the Republic of Korea, Macau, Mongolia, Panama, Tunisia and the United Arab Emirates. As it was noted in the message, the exсlusion was justified taking into account the expert assessment of the obligations undertaken by these jurisdictions to eliminate the shortcomings identified by the European Union. In each case, the commitments were backed up by the letters signed at a high political level. At the same time, the above countries and territories belong to a separate category now, subject to close monitoring.
We remind that on December 5, 2017 the EU announced its intention to exclude 17 jurisdictions from the “black list” of offshore zones that do not take appropriate measures to ensure financial transparency and combat tax crimes. Thus, 9 of the planned 17 countries and territories remained on the list, namely American Samoa, Bahrain, Guam, Marshall Islands, Namibia, Palau, Saint Lucia, Samoa and Trinidad and Tobago. This list also contains recommendations on the steps that must be taken to be excluded from it.

The European Union is discussing the possible exclusion of eight countries from the “black list” of offshore zones. It is reported by the IA Reuters, referring to the documents at its disposal. According to the agency, Panama, UAE, South Korea, Barbados, Grenada, Macau, Mongolia and Tunisia can be removed from the list. Such a proposal is justified by the fact that these countries have agreed to change their tax policy. In addition, an exclusion from the list of Bahrain was discussed, but in the end, it was decided to leave it on the list.
On Tuesday, January 16, the issue was discussed at the ambassadorial level. And next week the proposal will be considered by the EU finance ministers. In early December, the last ones published a “black list” of countries that did not want to cooperate with the EU in the field of tax reporting, as reported by the UNIAN. The list includes 17 countries, namely: American Samoa, Bahrain, Barbados, Grenada, Guam, Macau, Marshall Islands, Mongolia, Namibia, United Arab Emirates, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and South Korea. Offshore zones are on the territory of the most part of these states. We remind that the European Union decided to create a single “black list” after another leak of offshore documents called the Paradise Papers.

In recent years, the world community has realized the importance of the corporate transparency. The Panama Papers, high scandals with corruption and tax evasion have caused a radical shift in the attitude towards anonymous companies. The creation of the registers of beneficial owners (hereinafter referred to as "the UBO registers") is considered as the main instrument for increasing transparency. This idea underlies the EU legislation, FATF recommendations, G20 initiatives, the OECD project to combat on Base Erosion and Profit Shifting.

For the EU Member States, the obligation to establish the UBO registers, stipulated by the fourth Anti-Money Laundering Directive (AMLD IV), entered into force on June 26, 2017. However, there are still many questions about how the UBO registers will work in practice. The European states independently define in the national legislation such terms as "legal entity", "legal structure" and "UBO". The concern about data confidentiality is also increasingly growing in Europe, as the countries are discussing who should be allowed access to the registers and for what purpose. Will they provide information only to law enforcement and regulatory authorities, or yet to financial institutions within the framework of the client verification procedure? Each country also decides independently whether the register will be public. At present, it boils down to an interpretation of that idea who has "legitimate interests".
For example, in Germany, since October 1, 2017, the Transparency Register has been introduced. It contains the information on the identity of beneficial owners and detailed information on the share held by the legal entities, partnerships, as well as with respect to the foreign trusts and funds without legal capacity, which purpose is to serve their founders. The register will be available to the government agencies, individuals who are required to verify the clients and the third parties, such as journalists, public organizations and potential commercial partners, provided that any such third party can demonstrate a legitimate interest in the access to the information.
Great Britain has introduced a register of people with considerable control. This register was introduced one of the first - April 6, 2016, but it contains less information than the UBO register (for example, it does not include information about the beneficial owners of the trusts). The registry data is publicly available, but the British law provides for the ability to close registry data in cases when a company or partnership has reason to believe that the disclosure of the controller may endanger the controller or his relatives.
Following the UK, the UBO registers are being introduced in the British-dependent territories. All crown lands and overseas territories have signed an agreement to enhance the exchange of information on the beneficial owners and controllers between the law enforcement agencies. Thus, only this year such commitments in the national legislation have been introduced by the Governments of Jersey, Guernsey, the Isle of Man, the British Virgin Islands and the Cayman Islands. In these countries, the requirements for the companies to maintain the UBO register have already been introduced. The rest offshore British-dependent territories are ready to provide the British authorities with information on the beneficial owners upon request.
As a result of pressure from the Organization for Economic Cooperation and Development, other offshore jurisdictions also introduce into their legislation a requirement for the companies to maintain the UBO registers. So, in the Seychelles, the amendments to the Law on International Business Companies have been adopted in July 2016. The amendments provide for each Seychelles company to maintain the UBO register, keep it at the registration address in the Seychelles and provide data from the register to law enforcement and regulatory authorities upon the request. The similar requirements have also been introduced into the legislation of Belize, having adopted the amendments in the Law on International Commercial Companies, which came into effect from July this year.
In March 2017, the Companies Act has been amended in Singapore, demanding to keep the registers of the beneficiaries and nominees not only for the companies registered in Singapore, but also foreign companies operating in Singapore. Following Singapore, the government of Hong Kong plans to introduce the relevant changes into its legislation. According to the results of public hearings held by the State Financial Services Bureau, the Parliament has developed the amendments to the Companies Act, which were published in the form of a bill in the official newspaper in June 2017. After the adoption of this law, the companies established in Hong Kong will have to provide the information on beneficial owners only to the competent authorities.
In Russia, the requirement to maintain the UBO register came into force at the end of 2016. The companies must keep the information on the beneficial owners for five years. They are obliged to provide this information at the request of “Rosfinmonitoring”, tax authorities and other authorized state bodies.
In Russia, the requirement to maintain the UBO register came into force at the end of 2016. Companies must keep information on beneficial owners for five years. They are obliged to provide this information at the request of “Rosfinmonitoring”, tax authorities and other authorized public authorities.
Ukraine was among the leaders in this race to disclose the ultimate beneficiaries. The Law on amendments to certain legislative acts of Ukraine regarding the determination of the ultimate beneficiaries of the legal entities and public figures was adopted in 2014, and the May of 2015 was established as the deadline for the fulfillment of the obligation to provide the data on the ultimate beneficial owners to the state register. Moreover, all the data provided were entered in the open register.
The UBO registers simplify the process of customer verification, so they could be extremely valuable for a number of organizations conducting detailed inspections (for example, banks and other financial institutions). But there must be a 100% certainty for this that data can be relied on from the register without being exposed to an increased risk. Unfortunately, the request for additional information from the individuals when creating a company does not guarantee the accuracy, timeliness and completeness of the information provided. To reduce the chances for those who wish to provide false or inaccurate information about the beneficial owner in state registers, special technologies that are already used in the private sector should be used (for example, cross-checking, large data, artificial intelligence used to prevent fraudulent Internet purchases).
Currently, there are many other gray areas around how each state implements the requirement to introduce the UBO registers into the national legislation. On the main issues - who is the beneficiary owner, who is the administrator of the register, its controller - each state has a certain freedom in interpretation. All this complicates the use of the information from the official sources, which is rather scattered. It should also be taken into account that state authorities can be also corrupt and protect a certain business or politicians, and no one will ever know about it unless a leakage similar to the Panama Papers occurs.
The real value of the information about the beneficial owners of the companies is the creation of one centralized register. Thus, the Article 30 of the AMLD IV suggests that by 2019 the UBO registers of the EU member states can be linked through the European Central Platform, providing an integrated source of the UBO information throughout the EU. It is still not clear how exactly this will work, but the European Commission is tasked with drawing up a report on the assessment of the technical conditions and the order of ensuring the interconnection by June 2019.
As for the rest of the countries, unlike the EU, it is, of course, impossible to establish universal obligations for all of them. However, the voluntary initiatives already exist, and the countries will join them under the pressure of international and public organizations. After the Global Anti-Corruption Summit in London in May 2016, the OpenOwnership was created - a project to create an open Global Register of Property Rights, the data from which will be interconnected between jurisdictions, industries and with other data sets. The creator and manager of the Global Registry is a consortium consisting of leading international organizations for the struggle for transparency: Transparency International, OpenCorporates, Global Witness, Worldwide Web Foundation, Open Contracting Partnership, ONE Campaign and B Team. The first country that officially confirmed its readiness to integrate data on the beneficial owners of companies into the Global Register was Ukraine in April of this year.
Only in the last year the mankind has significantly advanced in the direction of increasing the transparency of corporate ownership. And this trend is only increasing. The most civilized countries either have already introduced the requirements for the maintenance of the UBO registers, or they are at a certain stage of consultations on this issue. While access to the data remains one of the most controversial issues, the countries are striving to find the right balance between maintaining the principle of transparency and fears about the safety of the potentially vulnerable individuals and cyber security. However that may be, it is becoming increasingly difficult to hide the information about the owners of the company through offshore zones and nominal shareholders. The business will have to revise its corporate structures and learn to work in full transparency, including the ability to track any transactions. The companies need to create a literate history today for both enterprises and their beneficiaries.