Concerns over fresh loopholes in EU Tax Evasion Crackdown

Jul 06, 2016 12:00 AM

Fresh European Commission proposals aimed at cracking down on tax evasion and financial corruption are a step closer to improving financial transparency but have left open loopholes that could be exploited in the future, transparency campaigners have told.

Following the release of the Panama Papers, the European Commission has unveiled plans that would give the public access to information in a beneficial ownership registry as part of efforts to reform global financial systems and put an end to tax evasion.

Welcoming the Commission's "quick response to the Panama Papers," which revealed "the easiness with which people can actually hide their money and assets through anonymous companies and trusts," Laure Brillaud, policy officer for anti-money laundering at Transparency International, told the reforms would "increase transparency around beneficial ownership."

​​"This is something we have campaigned long and hard for and we're pleased to see the Commission recognize that transparency is vital to end the system of secrecy which helps allow the corrupt to hide their stolen cash," she said.

"Only when we can see who owns what, we can stop the kind of shady practices exposed in the Panama Papers."

Fears Over Trust Loopholes

While the efforts to establish a public registry has been praised, there are concerns that the EU's latest measures still contain many shortcomings that could facilitate further illegal financial activity.

Of greatest concern are potential loopholes that could see trustees not based in EU countries being exempt from such public registries.

​"We fear that trusts will become the next vehicle for money laundering," Brillaud said.

"This would create a major loophole and open a new avenue for money launderers to laud the proceeds of their illegal activity, so this is a major loophole that we think should be addressed."

​"The register of beneficial ownership of trusts should cover any trusts with a connection point in an EU member state. If one of the beneficiaries or one of the trustees is a resident in an EU country then the national register should cover those trusts."

In order to combat the concerns campaigners have turned to France, where the government has recently introduced its own public register of trusts that requires the information of anyone with a link to the country to be included.

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