Business legislation gives insufficient protection

Faroese laws on limited and limited liability companies need to be in accordance with the laws in OECD member nations.

The Ministry of Trade has now proposed amendments to these laws following the advice from the OECD that so-called ‘bearer shares’ can be exploited to cover up the identity of the share owner, which can facilitate tax evasion, laundering and terrorism financing.

A bearer share is an equity security wholly owned by whoever holds the physical stock certificate, thus the name ‘bearer’ share. The issuing firm neither registers the owner of the stock nor tracks transfers of ownership; the company disperses dividends to bearer shares when a physical coupon is presented to the firm.

The trade ministry’s new proposal seeks to ban the use of these bearer shares.

Part of international collaboration

The Faroes are part of the intergovernmental body Financial Action Task Force, FATF, which seeks to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorism financing and other related threats to the integrity of the international financial system.

In the 2017 FATF assessment report for Denmark, the Faroe Islands and Greenland are singled out as having inadequate legislation for preventing money laundering and terrorism financing.

The Faroese legislation contains no rules about the registration of real owners. The new proposal aims to introduce such rules in accordance with the FATF recommendations.

Translated by prosa.fo