About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

28 Int'l Tax Rev. 47 (2017-2018)
Using Blockchain for Transparent Beneficial Ownership Registers

handle is hein.journals/intaxr28 and id is 317 raw text is: sing blockchain for transparent beneficial ownership registers The OECD and the Financial Action Task Force (FATF) are considering how to improve implementation of the international standards on transparency, including on the availability of beneficial ownership information and its international exchange. Julia de long, Alexander Meyer, and Jeffrey Owens of the Global Tax Policy Centre at the Institute of Austrian and International Tax Law within the Vienna University of Economics and Business explore how blockchain technology could be used to achieve this goal. International initiatives to enhance financial transparency over corporate vehicles, trusts, and other similar legal arrangements to prevent their misuse have been ongoing for more than two decades. However, the leak of the Panama Papers in April 2016 revealed the continuing ease with which opaque corporate vehicles, trusts, and secrecy jurisdictions are able to be used to facilitate both the commission of predicate offences - including bribery, corrup- tion, transfer mispricing, and tax evasion - and the laundering of the subsequent proceeds. Following the leaks, the G20 called on the FATF and the OECD Global Forum to consider ways to improve implementation of the international standards on trans- parency, including on the availability of beneficial ownership infor- mation and its international exchange. This article identifies relevant features of blockchain/distributed ledger technology, and seeks to explore its potential use in improv- ing existing initiatives for the collection and distribution of infor- mation on beneficial ownership, particularly with respect to centralised registries such as those mandated by the European Union's fourth Anti-Money Laundering Directive. What is blockchain/distributed ledger technology? Blockchain is a technology based on shared or decentralised ledgers, which enables direct peer-to-peer transactions by resolving the trust issue between unrelated parties. The technology is revo- lutionarv in the sense that it distributes the information as well as the rights, responsibilities and trust to multiple participants in a shared network. It grants permissioned or full access to databases in the form of ledgers of information to each participant on the blockehain. This transforms a node on the network from a conven- tional provider and consumer of data, to the owner and point of storage of the same data. Blockchain networks can be public (per- missionless), private (permissioned), or a hybrid model. Equal availability of data, which is updated automatically and synchronically on all ledgers of all nodes on the blockchain, results in the fundamentally transparent and open ledger system. Transparency, entrenched into distributed ledger technology is a key attribute of the blockchain, which makes it highly valuable where access to information is traditionally compartmentalised or fragmented to a detrimental effect of users of such information. Where transparency is a concern, recent advances in blockchain designs provide for permissioned access to shared data, while future advances are focused on selective distribution of the data itself while still maintaining the ability for any participant to vali- date and trust all data, distributed to them or not. Distribution of ownership and control over data across the blockchain network effectively results in the production of perma- nent and immutable records. The integrity of the records on the ledger is secured in a chain of linked blocks or groups of transac- Blockchain is a revolutionary technology that distributes information as well as the rights, responsibilities and trust to multiple participants in a shared network tions. Each block of transactions contains new information as well as a validation, or hash, of the prior block and a time stamp. The new information must comply with a pre-defined set of rules, the facts of which must be attested to by a majority of special 'mining' participants. As a result, no one single party can tamper with the database undetected, as inconsistencies will be identified elsewhere on the network. Applying blockchain to the issue of transparency and beneficial ownership Corporate vehicles and other forms of legal arrangements such as trusts are highly vulnerable to misuse for illicit purposes, and are an attractive way to disguise and convert the proceeds of crime before introducing them into the financial system. The potential for these vehicles to be misused could be significantly reduced if information regarding both the legal and the ultimate beneficial owner, the source of the vehicle's assets, and its activities, were readily available to the competent authorities. This information can assist law enforcement agencies and tax administrations in identifying those persons responsible for the activity of concern, or who may have rel- evant information to further an investigation, which in turn allows them to more effectively 'follow the money' in financial investiga- tions involving suspect accounts/assets held by corporate vehicles. However, countries face significant challenges when implement- ing measures designed to ensure the timely and accurate availability of beneficial ownership information. Many of these challenges can be traced back to a lack of political will or inadequate legislative WWW.INTERNATIONALTAXREVIEW.COMn June 2017 47

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most