Imagine a marionette puppet show, where the puppets move gracefully on stage, controlled by invisible strings from above.
At first glance, it may seem that the marionettes are independent and control their own movements. But in reality, there is a hidden puppeteer who has the true power.
In many ways, legal entities (like shell companies with hidden owners) resemble the marionette show. Just like the marionettes on stage, we can see the company and its managers, but the true source of influence – the puppeteers, i.e., the beneficial owners of these entities – are hidden behind the scenes.
A beneficial owner is the individual who ultimately owns, profits from or directs a corporate vehicle, like a company. Though they remain out of sight, these beneficial owners control or influence the company’s direction while benefiting from its profits.
When such companies thrive, other businesses lose money, governments cannot identify who is bidding for contracts, and the public cannot determine who is funding political parties.
Beneficial ownership transparency is like removing the curtain on the marionette show and revealing who is really pulling the strings — the true owner.
Access to beneficial ownership information is crucial to unmasking these shadowy figures, preventing manipulation, ensuring accountability and helping authorities to trace the proceeds of crime and freeze, seize and ultimately confiscate stolen assets.
For example, a construction company initially contracted to build schools and hospitals started expanding by acquiring businesses that managed school meals, hospital transportation and other public services. However, without clear beneficial ownership disclosure, policymakers were unaware of the company's broad involvement in these essential services. When the company eventually collapsed due to poor management, it didn’t just affect construction projects — it also disrupted school meal programs and hospital transportation. If beneficial ownership disclosures had been in place, policymakers could have understood the risks and taken steps to prevent or mitigate the fallout.
Illicit financial flows – the proceeds of corruption and other crimes – are often moved around the world using obscure company ownership structures. This contributes to an environment of secrecy and makes it extremely difficult for law enforcement to follow the money to seize and return stolen assets.
Recovering proceeds of corruption is complex, particularly when multiple jurisdictions are involved. In a Stolen Asset Recovery (StAR) Initiative survey, nearly 70 responses from countries surveyed noted difficulties in identifying and verifying the beneficial ownership of suspected corruption proceeds.
This is why beneficial ownership information needs to be available and connected internationally and domestically. This information could include tax records, procurement contracts, asset declarations, real estate transactions or even fishing licenses.
The establishment of dedicated beneficial ownership registers is a relatively new area of reforms in a long list of anti-corruption commitments. Therefore, technical challenges arise.
What is needed to truly harness the potential of beneficial ownership information is strengthening accuracy, standardizing collection and sharing such information. At times, limited verification, poor compliance and insufficient cooperation mechanisms stand in the way of effectively using the data for corruption investigations and prosecutions, asset recovery, procurement and tax integrity.
For example, due to an outdated registry, the information provided by a construction company could appear legitimate on paper, but it wouldn’t reflect the current reality. Equally, when the beneficial ownership registry is not linked to critical databases, such as tax filings, corporate records or property databases, this disconnect makes it nearly impossible for authorities to cross-check the information.
The United Nations Office on Drugs and Crime (UNODC) has been collaborating closely with Open Ownership (OO), a non-profit organization, to drive transparency and accountability in corporate ownership and control. As a result of this collaboration, in 2023 alone UNODC and OO jointly supported 25 countries and around 150 public officials and others to establish beneficial ownership transparency regimes.
For example, in the Philippines, the two organizations jointly designed trainings for authorities on the value of using beneficial ownership information and helped facilitate 20 data-sharing agreements between the Securities and Exchange Commission - the holder of the information - and other authorities.
Learn more about UNODC’s anti-corruption mandate: UNODC Corruption and Economic Crime Branch
UNODC’s partnership with Open Ownership is generously supported by the Norwegian Agency for Development Cooperation.
