While being an exciting and dynamic region in which to invest, Latin America has traditionally been viewed with suspicion by some people who have concerns over corruption and fraud. To combat that, Ultimate Beneficial Owner (UBO) registries are being brought in throughout the continent in order to promote transparency and help build confidence in Latin America.
However, there are some serious challenges regionwide, with small businesses prevalent across Latin America and the Caribbean. The efficiency and funding of some tax offices and authorities also sometimes leave much to be desired. Nevertheless, the future does seem bright for financial transparency across the region.
What are UBO registries?
Typically, these require companies of a certain size to register the details of their Ultimate Beneficial Owners. This won’t be someone who merely owns a few shares, but usually a person or business that holds a meaningful stake in the company. Depending on the country, this typically means 15-25% of shares, although it can be as little as 5%.
An ultimate beneficial owner can also refer to a person or business that holds significant influence over the company’s operations. This may be control of the board through special voting privileges, veto powers, or unfettered executive control, among other things. As you can see, there is some flexibility and room for interpretation here.
The idea is to ensure that the true individuals behind corporate structures—often hidden behind layers of trusts, shell companies, or complex corporate arrangements—are identified and accountable. This transparency is crucial in preventing financial crimes such as money laundering, tax evasion, and corruption, which have historically plagued both developed and developing economies.
The authority entrusted with keeping UBO records is usually connected to the local tax office, finance ministry, or local equivalent. In some cases, there is direct control by the main organization; in other countries, there is a dedicated department for the issue. These are almost always online and maintained by the company concerned, with significant penalties if not updated regularly.
Why are UBO registries so important in Latin America?
The Panama Papers leak in 2016 highlighted how Latin American elites used shell companies and complex corporate structures to evade taxes and launder money, triggering a wave of reforms in the region. However, despite efforts to curb financial crimes, the opacity of company ownership structures has remained a significant challenge.
With global competition for investment dollars and increasing scrutiny from tax bodies, this is an area of financial compliance that is becoming of paramount importance. By bringing in UBO registries, Latin America is breaking the mold and aiming to show that it is just as trustworthy as anywhere else. Still, a good local partner to help you through regulation and provide tax advisory services is ideal.
UBO Registry Implementation in Latin America
Several Latin American countries have taken steps to implement UBO registries in recent years. The bigger economies are mostly well set up, whereas smaller countries are facing bigger hurdles as they move toward financial transparency.
UBO registries, not just in the region but globally, are generally based on Financial Action Task Force (FATF) guidelines. FATF is an international organization focused on fighting fraud and financial malfeasance. There are also affiliated local groups such as GAFILAT, the Latin American local organization.
Between 2018 and 2023, a wave of UBO registry laws was passed across Latin America, with countries like Brazil, Mexico, Argentina, Chile, and Colombia leading the way. These laws aimed to improve corporate transparency by requiring companies to disclose their beneficial owners to national authorities. However, enforcement remains challenging across the region due to issues such as limited public access to UBO data, inconsistent enforcement mechanisms, and concerns over privacy and data protection.
The Future of UBO Registries in Latin America
As more Latin American countries implement UBO registries and refine their systems, the potential to combat corruption, tax evasion, and money laundering in the region will significantly increase. However, the success of these efforts will depend on the robustness of the legal frameworks, the accessibility of the data, and the enforcement mechanisms that underpin the registries.
The road ahead will require sustained commitment to ensuring that UBO registries not only exist on paper but also function as meaningful tools for transparency, accountability, and good governance across Latin America. The success of trailblazing large economies will hopefully be a force that drags forward more developing and smaller countries.
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