Transparency and accountability in business represent the visibility of all information impacting both the investors and the consumers, and a reliable disclosure of the performance of a legal entity. In an effort to end financial crime and corruption, the majority of the governments worldwide, including Cyprus, are focusing on transparency in business especially when it comes to the corporate ownership and tax requirements.
Transparency to the stakeholders
Firms practicing corporate transparency are limiting the use of technical terminology and are generally avoiding any distortion of facts when communicating with their investors, suppliers, workforce, customers and consumers, as well as voluntarily sharing information on social and environmental impact of their products and/or services.
Keeping the employees informed, whether it concerns positive, neutral or negative updates, builds confidence and trust within an organization, strong foundation of organizational transparency, supports sustainable growth and maintains higher motivation of their personnel.
When it comes to the investment firms transparency, access to price levels and market depth, financial information and developments, as well as the clarity on fees charged by the investment firms and funds, can reduce uncertainty and stock price fluctuations.
Transparency in banking, as well as lending and financing companies and financial institutions, is established by providing relevant information on strategy, assessments, procedures and policy decisions to regulators, stakeholders and the general public, in an open and timely manner. Proper disclosure of bank fees, interest rates charged by the credit card companies and monetary policy framework is considered crucial for a fair, responsible banking system with effective consumer protection.
Overall, for stakeholders advocating ethical business practice, the major areas to which the investors, consumers and regulators – equally – request to have access to are credible and relevant data on use of natural resources and waste management; sustainable manufacturing processes; clarity in funding, ownership, financial reports and staffing matters; data protection, anti-corruption and whistleblowing procedures and management.
Transparency to the regulatory bodies
Governance legislations are being implemented with a range of supervision and regulatory tools for monitoring of, including but not limited to, financial institutions, gaming industry, fiduciary services, cryptoassets, beneficial ownership, etc. The culture of transparency is being adopted globally, enabling access to information and implementing the right systems in place to achieve credibility required to sustain trust, geared towards financial stability.
In addition to potentially being exposed to reputational and commercial risk due to inadequate implementation of transparency procedures, organizations in the financial industry are accountable to regulators on national and international level (e.g. European Banking Authority EBA, Financial Action Task Force FATF, Office of Foreign Assets Control OFAC, Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism MONEYVAL, Federal Financial Monitoring Service FSFM, Financial Conduct Authority FCA, International Monetary Fund IMF, Organisation for Economic Co-operation and Development OECD, etc) with a requirement for formal reporting designed to combat money laundering and terrorist financing, starting with the Know Your Customer (KYC) process.
Along with the financial institutions, lawyers, accountants, auditors, tax advisers, insolvency practitioners, credit institutions, estate agents, chartered surveyors, trust/service providers, gaming companies and high value dealers (e.g. automotive dealers, jewellers, etc) are required to ensure due diligence procedures are effectively executed by their officially assigned Compliance Officers.
To further increase tax transparency, reporting obligations and exchange of information initiatives, like Common Reporting Standards CRS, Country-by-Country Reporting CbCR, Automatic Exchange of Information AEoI, Ultimate Beneficial Owner Registers UBO Registers, OECD Mandatory Disclosure Rules OECD MDRs, EU Mandatory Disclosure Rules for Intermediaries DAC6, and Economic Substance Requirements BEPS Action 5, are introduced globally, ensuring international tax compliance.
Failure to comply with the national and international Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) regulations and sanctions violations can and will have significant consequences, from damaged reputations, fines and penalties, to criminal prosecution and sanctioning. In 2019 alone, financial institutions worldwide were fined over €30B, with a bank in Switzerland being the biggest ‘contributor’ with a staggering €4.2B single fine for AML/CFT breaches charged by the French Criminal Court.
Certain jurisdictions remain under the scrutiny for the lack of implementing the adequate procedures, or their reluctance to fully cooperate with the international bodies. In such cases, particular countries, regimes, groups, companies, or individuals can be sanctioned – including asset freezes, travel bans, trade embargoes, economic sanctions, etc, and are included in publicly available sanction lists, created by governments or international bodies – for example, EU Consolidated List of Sanctions, UK HMT Consolidated List of Financial Sanctions Targets, OFAC Specially Designated Nationals and Blocked Persons List, United Nations Security Council Consolidated List, and many more.
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