Decentralized Blockchain Technology: Towards a Trusted and Transparent Beneficial Ownership Regime

Gilmour, Paul Michael

doi:10.1007/978-3-030-88036-1_8

Paul Michael Gilmour⁵

Part of the book series: Law, Governance and Technology Series ((LGTS,volume 47))

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1 Citations

Abstract

This chapter offers an insight into emerging blockchain technology and explores how it might support a trusted and transparent beneficial ownership regime. The international anti-money laundering community has advocated for central registers of beneficial owners as a measure to strengthen corporate transparency. A lack of corporate transparency is problematic because it helps to conceal illicit wealth by frustrating authorities’ efforts to identify the real beneficial owner behind corporate vehicles used to launder money and evade taxes. However, there are moral, legal, and practical challenges in implementing central registers of beneficial owners. The chapter considers the application of blockchain in decentralized and distributed digital ledger systems that are without a trusted third party. This chapter concludes with an examination of blockchain’s role in maintaining an accurate, verifiable, and transparent record of beneficial ownership information in support of global AML efforts.

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Article Open access 17 March 2022

Notes

1.
See Radon and Achuthan (2017), p. 90.
2.
It also includes those persons who exercise ultimate effective control over a legal person or arrangement. See Financial Action Task Force (2014), p. 8.
3.
The Organization for Economic Co-operation and Development (OECD) recognises the involvement of complex structures in obscuring corporate transparency. See Chandra (2020), p. 178.
4.
Gilmour (2020) identifies the moral, legal, and practical challenges in implementing the UK’s registers of beneficial owners.
5.
Konstantinidis et al. (2018), p. 1.
6.
For an explanation of how bitcoin system operates, see Nakamoto’s (2008) seminal paper.
7.
Ølnes (2016), p. 262.
8.
A novel model centred on confidentiality, integrity and accessibility of public sector records is presented in Warkentin and Orgeron (2019), p. 3.
9.
See Yli-Huumo et al. (2016), p. 21.
10.
International Monetary Fund (2000), para. 5.
11.
See Otusanya and Lauwo (2012), pp. 337–338.
12.
Zucman (2014), p. 139.
13.
Henry (2016), pp. 79–81; see also Bohoslavsky (2018), p. 752.
14.
Henry (2016), pp. 79–81.
15.
Bohoslavsky (2018), p. 754.
16.
Botiş (2014).
17.
See Botiş (2014); Georgiou (2017); Ojala (2018).
18.
Ojala (2018).
19.
For a comprehensive discussion on secrecy jurisdictions, see Christensen (2012).
20.
Tax Justice Network (n.d.).
21.
Gregory (2011).
22.
Oei and Ring (2018).
23.
Aluko and Bagheri (2012).
24.
See also Aluko and Bagheri (2012), p. 446.
25.
See Financial Action Task Force (2014) for guidance on beneficial ownership transparency.
26.
See Rusanov and Pudovochkin (2018), p. 23; Transparency International EU (2016), p. 15.
27.
See Hendriyetty and Grewal (2017), p. 67.
28.
Christensen (2012), p. 328.
29.
Young and Woodiwiss (2021).
30.
Zali and Maulidi (2018).
31.
Financial Action Task Force (2012).
32.
See also Rusanov and Pudovochkin (2018).
33.
For criticisms of the traditional three-stage ‘placement-layering-integration’ model, see Murray (2018); Cassella (2018).
34.
See Cassella (2018); Gilmour (2020); Naheem (2015); Teichmann (2020).
35.
Brown (2016); Cassella (2018).
36.
Naheem (2015).
37.
Murray (2018),
38.
Turner (2011).
39.
Financial Action Task Force (2018).
40.
See Umar et al. (2020).
41.
Gilmour (2021).
42.
See He (2010); Le Nguyen (2018); Stack (2015).
43.
Le Nguyen (2018).
44.
Sharman (2010), pp. 127–128.
45.
Jancsics (2017).
46.
See also Pacini and Wadlinger (2018).
47.
Jancsics (2017).
48.
Pacini and Wadlinger (2018).
49.
Her Majesty’s Revenue and Customs (2016).
50.
See van der Does de Willebois et al. (2011).
51.
Campbell (2018).
52.
See Campbell (2018); Pacini and Wadlinger (2018).
53.
For several case studies demonstrating the misuse of trusts, see Global Witness (2017).
54.
See Levi (2021).
55.
For useful insights into the role of professional intermediaries in facilitating money laundering, see Lord et al. (2018, 2019).
56.
See Martínez Cruz (2020), p. 146.
57.
See also Martínez Cruz (2020).
58.
He (2010); Lord, et al. (2018).
59.
See Christensen (2012), p. 333.
60.
See also Forstater (2017); Noseda (2017).
61.
Le Nguyen (2018).
62.
Böszörmenyi and Scheighofer (2015); Yeoh (2018).
63.
See Gilmour (2020), p. 730.
64.
Chandra (2020), p. 181; Raweh et al. (2017).
65.
See Nance (2018); Teichmann (2020).
66.
For early developments on AML controls, see Nance (2018), pp. 113–114.
67.
Mugarura (2020); Jayasekara (2020).
68.
Alldridge (2008); Financial Action Task Force (2012).
69.
For example, see Nance (2018), p. 117; and Simmons (2001). Most EU Member States, remain influential members of FATF insofar how anti-money laundering (AML) and counter terrorism financing (CTF) requirements are implemented internationally. See Borlini and Montanaro (2017).
70.
See Drezner (2007).
71.
Nance (2018); see also de Koker (2014).
72.
This CDD process is underpinned by the ‘Know Your Customer’ (KYC) principle rooted in many Western governments’ AML regimes. See Le Nguyen (2018).
73.
The customer due diligence regime is discussed in some detail in Zali and Maulidi (2018).
74.
See Zali and Maulidi (2018).
75.
Gilmour (2020).
76.
Gilmour (2020).
77.
See de Koker (2014), p. 285.
78.
Nanyun and Nasiri (2020).
79.
Cassella (2018); Chaikin (2017). The first Anti-Money Laundering Directive (1AMLD) introduced in 1991 recognized the role of beneficial ownership in money laundering, by requiring obliged institutions within Member States to verify their customers’ identity and report suspicions of money laundering. Subsequent updates have largely followed FATF Recommendations.
80.
See Salas (2005).
81.
See Gilmour (2020).
82.
Jourová (2017); Unger (2017); Zagaris (2018). For further insight into scope of beneficial ownership registers, see Gilmour (2020).
83.
For a critical overview of the EU’s 4th AMLD’s legal framework, which advocated for a risk-based approach to CDD, see Campbell (2018); Gilmour (2020).
84.
Global Witness (2018).
85.
See Mor (2018); Mourant (2017).
86.
See Department for Business, Energy and Industrial Strategy (2018).
87.
Mor (2018). Such strides are especially important considering that FATF’s 2007 critical evaluation report identified failures in the UK’s beneficial ownership regime at that time.
88.
The newly enacted Corporate Transparency Act (CTA) is part of the National Defense Authorization Act for Fiscal Year 2021 (H.R. 6395).
89.
See Greytak (2021); Kontrimas et al. (2021); Aguilar and Charnas (2020).
90.
Quinlivan (2020) provides a comprehensive list of exemptions.
91.
For example, publicly listed companies, companies having more than 20 full-time employees, and those having a physical office address within the US, are exempt, along with inactive businesses holding no assets or ownership interest in any corporation. See Greytak (2021); Open Ownership (2021); Quinlivan (2020).
92.
Ferranti et al. (2021).
93.
The CTA defines the beneficial owner of a corporate entity as a person who exerts ‘substantial control’ over the entity, or who directly or indirectly, owns or controls more than 25% of the ownership interest in it. See Greytak (2021); Ferranti et al. (2021).
94.
Thomas-James (2020).
95.
See Thomas-James (2020), pp. 1009–1011.
96.
Nakamoto (2008).
97.
See Barber et al. (2012); Simser (2015).
98.
Brown (2016).
99.
See Nakamoto (2008), p. 7. For further discussions on bitcoin, see Bashir (2017); Casino et al. (2019).
100.
See also Bashir (2017); Mukhopadhyay (2018); Simser (2015).
101.
Belonick (2020); Iansiti and Lakhani (2017).
102.
Belonick (2020).
103.
Lage et al. (2019).
104.
Turner et al. (2018).
105.
See Conte de Leon et al. (2017); Yeoh (2017).
106.
Wang et al. (2021).
107.
For example, see Conte de Leon et al. (2017); Orcutt (2018).
108.
See Conte de Leon et al. (2017), p. 288.
109.
Yli-Huumo et al. (2016).
110.
Barber et al. (2012).
111.
See also Barber et al. (2012).
112.
Reynolds and Irwin (2017).
113.
See Barber et al. (2012); Konstantinidis et al. (2018).
114.
Mikołajewicz-Woźniak and Scheibe (2015).
115.
Al-Saqqa and Almajali (2020).
116.
Belonick (2020).
117.
Lage et al. (2019).
118.
Norta et al. (2019).
119.
See Al-Saqqa and Almajali (2020), p. 7.
120.
Saad et al. (2021).
121.
See Saad et al. (2021), p. 1961.
122.
See also Kovačević (n.d.).
123.
See Casino et al. (2019); Konstantinidis et al. (2018); Lage et al. (2019).
124.
Conte de Leon et al. (2017); de Meijer (2020).
125.
Ma et al. (2019).
126.
See Ma et al. (2019), pp. 4–5.
127.
According to Conte de Leon et al. (2017), p. 296.
128.
de Meijer (2020).
129.
de Long et al. (2017); Shust and Dostov (2020).
130.
See Bashir (2017), pp. 440–441.
131.
Ghiro et al. (2021); Konstantinidis et al. (2018); Lemieux (2016).
132.
Ølnes (2016).
133.
See Ghiro (2021), p. 13.
134.
See de Long et al. (2017), p. 4.
135.
de Long et al. (2017), p. 5.

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Paul Michael Gilmour

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Louis de Koker

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Gilmour, P.M. (2022). Decentralized Blockchain Technology: Towards a Trusted and Transparent Beneficial Ownership Regime. In: Goldbarsht, D., de Koker, L. (eds) Financial Technology and the Law . Law, Governance and Technology Series, vol 47. Springer, Cham. https://doi.org/10.1007/978-3-030-88036-1_8

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