HONG KONG (Reuters) - Hong Kong is beefing up corporate disclosure laws following the Panama Papers scandal, but unlike many other financial centres it is not making it any easier to access the information, transparency campaigners and private investigators say.
Instead it charges high fees to access the territory’s corporate registry, a tool transparency activists say is vital to prevent white-collar crime and promote a fair business environment as it contains information on company directors, shareholders and financial holdings.
The future of private company registries has been in the spotlight this week at the Corporate Registers Forum in Hong Kong, which gathers representatives of company registers globally, along with the World Bank and the United Nations.
Since the Panama Papers exposed how opaque shell companies can be used to conceal ill-gotten gains or avoid tax, several countries including Japan, Israel, Bulgaria and France have largely made their company databases freely available, while Britain became the first country globally to provide free access to data showing real company owners, rather than their nominees.
However, critics say Hong Kong is dragging its feet.
“At a time when an ever-increasing number of countries are making their company registers available as free, open data, it’s saddening to see Hong Kong go against the direction of travel and undermines confidence in Hong Kong companies around the world,” said Chris Taggart, chief executive of OpenCorporates, an online database of corporate registries that has been campaigning for company data transparency.
It scores Hong Kong 25 out of 100 in its global registry rankings, placing the territory well behind rival financial hubs London and New York, and even the likes of Russia, Niger, Samoa, and Myanmar.
The Panama Papers showed Hong Kong was the most active centre in the world for the creation of shell companies. In response, Hong Kong quietly pushed through proposals on anti-money laundering laws and company disclosure legislation, including a requirement that companies reveal the identity of their true owners.
But in Hong Kong, home to more than 1.3 million private companies, access to the information comes at a cost.
Private investigators said the corporate registry fees make it increasingly expensive to conduct investigations into potential crimes amid increasingly complex corporate structures.
“The pay wall is cumbersome and expensive. For larger investigations where a company may have hundreds of subsidiaries or associated companies, the process can be prohibitively expensive,” said Jane Moir, director at Princedale Advisory, a Hong Kong corporate investigations firm.
An investigation into a large company could easily rack up fees of HK$100,000 ($13,333), a Reuters analysis shows.
A spokeswoman for the registry though said fees are “minimal” and do not constitute a pay wall deterring the public from conducting searches.
She said the fees are set on the basis that they can be recovered as a business cost but David Webb, a corporate governance activist, said there is no justification for recovering costs for information searches.
In fact, the Hong Kong government could stop charging fees for searching the registry and still make HK$166 million in profit from fees it charges new companies to incorporate as legal entities and make annual filings, his analysis shows.
Last Friday alone, 855 companies were incorporated in Hong Kong, according to his eponymous Webb-site.com which tracks the public part of the registry data.
Last year, the government also required users to declare a reason for searching the registry - a move to protect the privacy of company directors and shareholders.
However, the box-ticking declaration does not explicitly include news gathering or publishing, making it legally risky for some users such as journalists or others that publish reports based on the information.
The move to protect privacy was seen by rights groups as another example of creeping censorship in the former British colony, under the influence of Beijing.
The aim of the privacy law though was to strike a balance between upholding the freedom of the press and protecting personal information, Hong Kong’s privacy commissioner for personal data, Stephen Kai-yi Wong, said in a statement.
Exemptions for news outlets may apply in certain circumstances, he said.
Still, some see the move as an attempt by Hong Kong’s rich and powerful to suppress information on their affairs.
“There was nothing to suggest that privacy was a major concern,” said Moir. “The requirement did, however, seem to coincide with a number of reports by investigative journalists into the financial affairs of the political elite.”
Reporting by Michelle Price; Editing by Neil Fullick