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A small Caribbean country nestled next to Guatemala, known for its crystalline waters and Mayan ruins, has made a name for itself with a new system aimed at fighting financial crime. 

Belize, a country with just under 400,000 people and an economy one-tenth the size of Glasgow’s, has implemented a digital registry to track the ultimate owners of companies registered in the country and improve financial transparency.

The Beneficial Ownership Registry

Legislation approved in 2022 by the Belizean government set up the centralised BOR, a registry that tracks the people who ultimately own, influence, or control foreign and domestic companies that operate in the country. Financial entities, brokers, money services businesses, and life insurance companies act as “registered agents” to collect data about their clients’ ownership structure as set out by a new amendment in Belize’s Companies Registry Act. 

According to the amendment, which came into force in July 2023, registered agents must take “reasonable measures” to find out the name, address, and occupation of anyone who owns or controls more than 10% of a company. This information is then uploaded to the Online Business Registry System (OBRS), where it can be accessed by government institutions including the Financial Intelligence Unit and the Tax Department; members of the public can also get a short extract from an online portal. These records must be regularly updated, at least two years for “high risk” situations and less often but still regularly in other cases. 

A centralised tool for transparency

The Financial Services Commission, Belize’s non-bank financial services regulatory body, acts as custodian of the registry, but registered agents are ultimately responsible for getting and verifying data; if firms refuse to provide data, or declare incorrect information, they face high fines and penalties.

The BOR plays a crucial role in helping government institutions fight financial crime, from tax evasion and corruption to money laundering and terrorism financing. The registry makes it possible for suspicious activities to be flagged and investigated much earlier than they otherwise would be, and serves as an important mechanism of corporate accountability to the public. In February 2024, only a few months after the introduction of the BOR, over a thousand companies were struck off the Belize Companies Registry for failing to provide the necessary information; the FSC recently reported that three companies had been suspended and one was closed down as a result of information in the BOR. 

A model for the region?

Beyond its effectiveness in Belize itself, the BOR has been noticed by international bodies. A report by Global Financial Integrity (GFI) praised it as an important step towards transparency and the fight against financial crime in the region but highlighted several areas where the system could be improved.

Placing responsibility for data collection with registered agents is a good way to ensure accountability, but can backfire when agents lack the means or incentive to verify ownership information. Because the range of institutions that act as registered agents is so wide, there is a wide range of experience and diligence in collecting and verifying data. This means sometimes errors or omissions aren’t spotted by agents because of a lack of resources and experience. 

Small and medium-sized enterprises (SMEs) also sometimes find it difficult to comply with BOR regulations, as the interface of the online system is not user-friendly and the specific obligations can be hard to understand. GFI suggests increased support by the government to SMEs and smaller registered agents to ensure more consistent quality of data.

The BOR has also been criticised by GFI and other non-governmental organisations for its lack of transparency to the public; while government agencies can access a wide range of information on company ownership, only some of the data is made available to members of the public and press. Making all the data available to the public would keep the custodian agencies themselves accountable and help investigate and fight corruption at all levels. However, the government has cited data protection and prevention of misuse as reasons to keep information private. Sharing more information with the public might also further discourage some firms from disclosing complete information. 

Overall, however, the BOR does far more things right than wrong. The BOR is “a system in transition, one that has taken significant steps towards enhancing financial transparency and aligning with international standards to combat money laundering and terrorism financing,” said GFI in its report. The centralised system, online interface, and strong system of accountability make Belize’s registry a practical and effective way to increase transparency and fight financial crime. More importantly, it shows a commitment from the country to rise to global standards and become a player on the global financial stage. 

The Caribbean and financial crime 

Fighting financial crime became a priority for Belize after the 2021 Pandora Papers scandal, a massive leak of financial documents that named the country as one of many offshore havens used by world leaders and billionaires to shelter assets. A former Belizean Attorney General was accused by the International Consortium of Investigative Journalists of providing Americans trying to hide assets with shell companies and offshore trusts, exploiting Belize’s allegedly “opaque jurisdiction” to evade detection. 

The Belizean government responded to the accusations, saying that the country’s financial services industry was  “transparent, heavily regulated and underpinned by various pieces of legislation approved by a sovereign, democratic parliament and easily accessible online by the world.”

Initiatives like the BOR go a long way in fighting financial crime and revealing offshored assets, especially when they extend to foreign companies like Belize’s does. The country was removed from the EU’s tax haven blacklist in February of this year due to improved legislation, and its inter-agency financial crimes intelligence group, the Financial Intelligence Unit, receives technical assistance from the US to keep its processes up to international standards. 

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The Caribbean financial services industry still has a long way to go to join the established economies, especially when it comes to transparency and law enforcement. Its reputation for financial regulation isn’t helped by leaks like the Panama and Pandora papers, which place the region at the centre of a global effort by the world’s wealthiest to shelter their assets and avoid taxes. 

However, change is near. Belize’s BOR is both a powerful tool against financial crime in the country and a sign that Central American countries, no matter how small, are committed to transparency and growth; straightforward systems to improve accountability can work and will let the region join the global financial stage very soon.