The law on the registration of beneficial owners, two years after coming into force, still facing problems in implementation

Two years after the entry into force of the law on the registration of the final beneficial owners of businesses in Albania, the deadlines for the registration of the latter have been postponed from time to time, while the NBC has not imposed any penalties for law breakers, and has not a statistic on cases that refuse or carry out fictitious registration.

Authors: Dallandyshe Xhaferri dhe Fjori Sinoruka

In 2020, the Albanian Parliament approved the law “On the Register of Beneficial Owners”, which obliged every business in the Republic of Albania to register in the Register of Beneficial Owners, by June 2020. However, this initiative began to fail without yet taking a final form.

According to the report published by the Albanian government one year after the passing of the law, and the efforts to amend it, it results “that out of 59,165 existing reporting entities registered in the Commercial Register before the date of creation of the Register of Beneficial Owners, of which 8,689 entities with suspended status, based on DCM no. 273/2021, have the obligation to register the beneficial owner in the beneficial owner register, before the request to change their status in the commercial register, only 21,460 existing reporting entities have registered the data of their beneficial owners in the register until 10.11.2021”. In other words, approximately only 36.3% of the existing reporting entities registered in the Trade Register have recorded the data of their beneficial owners.

Furthermore, problems were initially encountered in the registration of the data of the beneficial owners of Non-Profit Organizations. According to the government report, out of 4,861 existing Non-Profit Organizations registered in the Register of Non-Profit Organizations, only 1,961 Non-Profit Organizations had registered the details of their beneficial owners in the register by November 2021. In other words, only 40.3% of NPOs had registered the data of the beneficial owners.

The lack of registrations on the part of businesses influenced the decision to postpone the deadline for the registration of beneficial owner data until April of this year.

“By means of this draft law, several legal changes have been undertaken that enable: Postponement of the deadline for the initial reporting of beneficial owners by existing reporting entities with indirect ownership registered in the commercial register and by Non-Profit Organizations, until 01.04.2022”, – is said in the government statement published in December of last year, but the National Business Center has informed the ACQJ that the deadline for fulfilling the legal obligation for the initial registration of data for entities with indirect ownership and NPOs was postponed until 30 June 2022.

On November 2 of this year, this institution announced that, as far as companies are concerned, 828 entities had not fulfilled this legal obligation, meanwhile, according to the data forwarded by AKSHI, until September of this year, the data of beneficial owners of about 42,000 commercial entities had been submitted.

The NBC informs the ACQJ that “for the entities that have not performed the initial registration of the beneficial owner’s data and their updating according to the legal deadlines based on the legal provisions, they are punished with a fine”, – adding that until the fine is paid these entities will not provide their services, except for the registration of changes to the data of the legal representative, as well as changing the status for reporting entities from “active” to “suspended” status in the Commercial Register and the Register of Non-Profit Organizations .

But, despite the request from the ACQJ, this institution has not provided how many companies were issued this measure against, and what was the monetary fine was.

The government’s initiative for the beneficial owner registration law started with problems

Aranita Brahaj, Executive Director of the Albanian Institute of Science, at the same time director of “Open Data”, tells ACQJ that the initiative of the Albanian government started with problems, as the law did not provide any guarantees.

“By approving a law that forces everyone to make a declaration, the Government and the Legislature damaged the purpose of the process”, – she says, describing this fact as the main reason why the law began to be implemented much later, “there was no focus on the companies that really need to be checked, verified and publicly known”, – she continues adding that “by self-declaration, the Legislator does not guarantee in any case that the information comes with authenticity. The verification process is not done even for businesses that are financed by public money or licensed for very important services of a public nature”.

For the economy expert, Zef Preçi, our country is still far from respecting transparency in economic activities.

“By comparing the current state of companies in our country, especially in terms of transparency and competition, it can be concluded that our country is far from recognizing and even further from implementing these well-known and universally accepted principles and models in today’s world “, – says Preçi.

Meanwhile, Brahaj admits that the way of drafting the law for the registration of beneficial owners has no efficiency in implementation.

“In my opinion, the way it was drafted, without an exhaustive declaration, with self-declaration without control and verification, with spaces for unclear declarations, the Law has only stressed businesses with the bureaucracy of the declaration and the pressure of fines if the declaration is not made on time.” – she notes.

She further asserts that in all this strange format with self-declaration, without verification, with a declaration just like businesses with commitment and public financing like others, the law does not have any efficiency in implementation.

“The bare minimum has been done to fulfill a formal condition”, – she concludes, emphasizing that only the owners of more than 25% of the shares and capital have the obligation to declare.

What does this mean? If an individual with a criminal precedent, a person with influence in politics and government is somewhere a shareholder in a company that has won public contracts, he is protected. That is, he is not identified if he has less than 25% control over the ownership of the business.

Ineficiency in the law on the declaration of beneficial owners, consequences in the economy

Zef Preçi, the economy expert, emphasizes for ACQJ that anonymity enables the development of illegal activities such as fiscal evasion, money laundering and corruption to develop outside the control of law enforcement authorities.

“Offshore companies have been used in most cases of corruption, including in Albania, to transfer hundreds of millions of dollars to companies without staff in countries known as ‘tax havens’, using complex money transfers, related shell companies and other legal structures which the so-called ‘beneficial owners’ hidden from plain view”, – says Preçi, taking as an example the companies created for incinerators, according to which there are well-founded suspicions that important politicians of the country are behind them.

“Transparency around beneficial ownership aims to prevent company owners from operating in secret. Designation in law as beneficial persons for individuals who own or ultimately control a legal entity, through direct or indirect ownership of 25% of the shares or voting rights or property interests in that entity, or through control through other means, or who benefits from a transaction carried out by a legal entity to its account helps to take a step forward in increasing transparency, but it is not enough”, – says Preçi.

“The 25% level of shares specified in the law leaves a path for concealment” – he concludes.

In the meantime, the NBC answers the question of the ACQJ about how they identify whether business contracts are genuine or not, by stating that “based on DCM No. 1088, dated 24.12.2020, “On determining the manner and procedures of registration and publication of data for the beneficial owners, as well as notification by the competent state authorities and by the obliged entities”, among others, the registrar of the NBC identifies whether or not the signatory has the right to carry out the registration and whether the submitted documentation does not contain unverified corrections or deletions.”

Despite the continuous postponement of the deadlines for the registration of beneficial owners, this law has not yet found full application, while the declaration of owners who own more than 25% of the shares leaves a path for hiding the real owners behind various businesses. both those that benefit from state contracts and those that operate in areas of high social risk, such as casinos or gambling.

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