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The UK government's announcement that it will tackle the 'phantom firms' that shield criminal masterminds from prosecution is a potential game changer in the fight against corruption

On Easter Monday, a bank holiday, the UK government announced that it is sending company secrecy on a permanent holiday, by requiring that the identities of those who own or control UK companies be publicly disclosed. With this landmark decision, the UK will become the world’s first country to require this level of transparency over company ownership.

Why is this so significant? In short, this could be a game changer in the fight against corruption involving the use of anonymous shell companies, or “phantom firms”. These secretive companies are commonly used by corrupt individuals and businesses to launder money linked to corruption, illegal weapons trading, drug and human trafficking, and tax evasion.

Developing countries are the victims of much of this abuse. The Nigerian dictator Sani Abacha allegedly used phantom firms to help steal as much as $5 billion from his country during his disastrous 5-year reign in the 1990s. The son of Equatorial Guinea’s president Teodoro Obiang reportedly used phantom firms to help spend some of the $100+ million that the US government alleges he laundered into the US. Between 2010 and 2012, phantom firms played a starring role in five highly dubious mining deals that swindled the impoverished people of the Democratic Republic of Congo out of more than $1 billion. The luxurious palace compound of recently deposed Ukrainian president Viktor Yanukovich’s was, until last year, partially owned by an anonymous British company.

These are just a few of the many examples in which phantom firms have been used to siphon money out of developing countries, money that could fund improvements in health and education instead of to line the pockets of corrupt politicians and businessmen.

That is why the UK government’s announcement is so important. It could mark the beginning of the end for phantom firms. But for that to become a reality, much remains to be done. Every country – not just one – must abolish phantom firms. If not phantom firms will always find a place to hide and continue to be used to siphon money from developing countries.

There have also been other encouraging signs in the past year that world leaders recognize the need to address this issue. Transparency – including around beneficial ownership – was a prominent feature of last year’s G8 Summit in Lough Erne. Following the Summit, all of the G8 countries, as well as UK Crown Dependencies and some Overseas Territories, released action plans for addressing the secrecy of beneficial ownership.

Earlier this year, the Cayman Islands and the British Virgin Islands held public consultations to discuss establishing centralized registers of beneficial ownership information and making that information publicly available. Jersey is currently holding a similar consultation. It remains to be seen whether or not these consultations represent real efforts at reform or window dressing intended to appease critics without altering the status quo.

Countries – including the UK – must also muster the political will to address the abuse of trusts and similar legal instruments. Without this a massive loophole will be created. It would be akin to closing the door to corruption while leaving a window wide open.

The 28 member states of the European Union have a golden opportunity to crack down on phantom firms. The EU is currently revising its Anti-Money Laundering Directive. As part of that process, last month the European Parliament approved a position that would make information about who owns and controls companies, trusts and similar legal instruments publicly available. Now the attention turns to the Council, where there is a broad range of opinions about how best to address the issue of phantom firms. EU member states should support and finalize the EU Parliament’s position, thereby helping ensure that phantom firms have no remaining place to hide or loophole to exploit.

The UK government’s announcement is commendable, and could signal an historic shift in how countries address the abuse of anonymous shell companies. But it will have relatively little impact if other countries fail to follow suit and instead allow (secretive) business as usual to rule the day.

Joseph Kraus is Senior Policy Manager for Transparency & Accountability at ONE, a global organization working to put an end to extreme poverty and preventable diseases in Africa.