Pacto Internacional de Derechos Civiles y Políticos

Description: Under an investigative system, the authorities seek to obtain (through compulsory powers, court-issued subpoenas, and other measures) bene-ficial ownership and control information when illicit activity is suspected, when such information is required by authorities to fulfil their regulatory/supervisory functions, or when such information is requested by other authorities domestically and internationally for regulatory/supervisory or law enforcement purposes.

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Primary advantages and disadvantages: For jurisdictions that have already developed an effective and efficient investigative mechanism, continued primary reliance on this mechanism may be more cost effective than to establish and maintain an extensive, up front disclosure system. Moreover, in jurisdictions where a substantial domestic commercial sector exists, primary reliance on an investigative mechanism may, under certain circumstances, avoid unnecessary costs or burdens on corporate vehicles (particularly smaller enterprises), which may stifle legitimate business formation. An investigative mechanism, if effective, may also enable policymakers to maintain a reasonable balance between ensur-ing proper monitorensur-ing/regulation of corporate vehicles and protectensur-ing legitimate privacy interests. An investigative system, however, requires the authorities to obtain beneficial ownership and control information from third parties, thereby introducing the potential for delays in the provision of information.

Suitability: Primary reliance on an investigative mechanism would be appro-priate in jurisdictions with the following characteristics:

• Authorities with strong compulsory powers and the capacity to obtain beneficial ownership and control information – primary reliance on an investigative sys-tem may be appropriate in jurisdictions where regulatory/supervisory and law enforcement authorities possess strong compulsory powers and have the capacity to obtain beneficial ownership and control information for reg-ulatory/supervisory, law enforcement, or sharing purposes. To enable the sharing of information on a timely basis, the jurisdiction concerned will have to devise efficient and rapid mechanisms for exchanging information at the domestic and international levels, since the requested authorities must first gather the information from a third party before transmitting it to the requesting authority.

• Reliable history of enforcement – primary reliance on an investigative mecha-nism may be more appropriate where the authorities in a jurisdiction have, on prior occasions, consistently displayed a commitment to employ their compulsion powers for regulatory/supervisory or law enforcement purposes or to assist other domestic and foreign authorities to fulfil their regulatory/

supervisory or law enforcement responsibilities.

• Judicial system functions effectively and efficiently – an effective investigative mechanism requires a well-functioning judicial system of high competence and integrity that is able to process subpoena or other order applications and to respond to requests for information in a timely manner.

• Beneficial ownership and control information is likely to be available within the jurisdiction – the effectiveness of an investigative system depends, to a sig-nificant extent, on the likelihood that beneficial ownership and control infor-mation of the type mentioned on pages 79-80 (under Important transparency

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elements at the establishment stage) is available within the jurisdiction in which the corporate vehicles were established. Consequently, primary reliance on an investigative system would be more appropriate in jurisdictions in which a large proportion of corporate vehicles are beneficially owned and con-trolled by residents or which conduct operating businesses requiring physi-cal premises in the jurisdiction of establishment and where persons are not able to effectively conceal their identity from authorities through the use of anonymity instruments.

Important elements: An investigative system is a general mechanism that relies on the general features of the legal system rather than on custom-made mechanisms to obtain beneficial ownership and control information. Accordingly, many of the suitability elements mentioned above also constitute important ele-ments, of which the following are particularly relevant:

•Institutional features under an investigative mechanism:

a) Adequately-staffed and well-funded regulatory/supervisory and law enforce-ment authorities – for an investigative system to be effective, sufficient financial and human resources must be allocated to the relevant authori-ties to enable them to undertake effective monitoring and to investigate any illicit activity. In addition, adequate resources should be devoted to maintaining and enhancing the skill and expertise of the staff.

b) Authorities with strong compulsory powers – the regulatory/supervisory and law enforcement authorities within a jurisdiction must be granted powers that would enable them to obtain, on a timely basis, beneficial ownership and control information from any physical or legal persons possessing rele-vant information for the purpose of investigating illicit activities, fulfilling regulatory/supervisory functions, and sharing such information with other authorities domestically and internationally. With respect to such relevant information, efforts should be directed towards rapid access. In certain jurisdictions, rapid access may only be attainable if the relevant authori-ties are able to access such information without having to first obtain a court order. In addition, compulsory power may include an explicit power to inquire into the beneficial ownership and control of corporate vehicles.

c) A strong, predictable, and efficient judicial system – an investigative system requires a well-functioning judicial system of high competence and integ-rity to, among other things, issue subpoenas and other orders, respond to requests for information, and resolve challenges to the use of compul-sory powers in a timely manner. Primary reliance on an investigative sys-tem requires that the legal syssys-tem allow courts to act rapidly and decisively when the situation arises.

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• Maintenance of beneficial ownership and control information by companies – to enhance the capacity of authorities to obtain beneficial ownership and con-trol information, a jurisdiction may choose to require companies to maintain such information. A jurisdiction may also choose to give its corporations the power to inquire into the beneficial ownership of their own shares.