Transparency International Slovenia (TI Slovenia), a non-governmental corruption watchdog, joined six partners in the EU to prepare a study about the true ownership of corporations. The project was carried out in conjunction with the transfer of Fourth EU Directive Against Money Laundering and the Funding of Terrorism into Slovenian law.

The legislation, which went into effect last month, was presented this week at the Office Against Money Laundering. “The new law against money laundering is effective in determining the ownership of company. It got an 82% rating on an international scale. It’s true that there are still some loopholes that need to be closed. We gave nine recommendations to the decision makers. Among them is a recommendation about how to define the actual owner of an entity. Another deficiency is the register of true owners of a company that is now being set up, which isn’t up to international standards when it comes to the transparency of data. We are also cautioning about the authority of certain players, both in terms of subjects and oversight. It’s doubtful whether the oversight will be sufficient because the subjects are numerous and the authority of the overseer is limited,” says Sebastijan Peterka, a researcher at TI Slovenia, commenting the new legislation.

Malevolent hiding places
Various methods of concealing the true ownership of companies are a common in Slovenia; this is something that a new owner registry is supposed to prevent in the future. Peterka cautions that according to the international definition, the actual owner of a company is the specific person who manages the company, oversees it, and enjoys benefits from it. Various straw man owners and managers, ownership by funds and layers’ offices, as well as “phoenix company fraud,” all conceal true ownership and are commonly used for money laundering, the concealment of funds from debtors, and corruption. In some cases, they act as bypasses for international sanctions or even to fund terrorism. The decision to reveal the true owners of companies was encouraged by the publication of the Panama Papers, which concerned owners of companies that are registered in certain tax havens.

Adria Airways will be a test case
The new legislation includes SDH (The Slovenian Sovereign Holding) and DUTB (The Bank Assets Management Company) as subjects of the Law Against Money Laundering and the Funding of Terrorism. According to TI Slovenia, this may end up affecting the outcome of privatization processes. Adria Airways is expected to be test case for the new legislation. The names of the actual owners, which the company will add to the register of true owners, will make it clear whether the system works in practice even in such complicated cases.

Loopholes in the new legislation
TI Slovenia says that the Slovenian legislation is “very strong” when it comes to money laundering, at least on paper, when compared to other countries. However, it still has a few loopholes. The planned register will be cumbersome, since it doesn’t allow browsing or machine processing, both of which similar registers elsewhere do enable.

G. C.; Translated by J. B.