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When the Lu Rong Yuan Yu 956 was apprehended in June 2019, it seemed like a victory in Ghana’s long war on illegal fishing. The industrial trawler had been caught fishing for sardinella, a widely consumed species reserved for small-scale fishers. Authorities issued a US $1-million fine to the vessel’s apparent owner, the Ghana-based Gyinam Fisheries & Sons Limited. But the company refused to pay, the vessel continued to fish, and, less than a year later, the Lu Rong Yuan Yu 956 was detained again for the same crime.
Hefty fines can be effective deterrents to illegal fishing; but in the case of the Lu Rong Yuan Yu 956, the fine never reached its true owner. An investigation by the nonprofit Environmental Justice Foundation (EJF) revealed that Gyinam Fisheries & Sons Limited is actually a front for a Chinese company: Rongcheng Ocean Fisheries Company Limited.
Foreign investment is technically prohibited in Ghana’s industrial trawl sector, but that doesn’t stop it from happening. To get around the ban, foreigners pay locals to set up a front company, and to look the other way as foreign-owned vessels fish in Ghanaian waters. The EJF investigation found that, as of 2018, over 90 percent of the Ghanaian industrial fleet was effectively Chinese owned.
These illegal joint ventures are but one example of a vexing problem plaguing global fisheries: the use of complex administrative structures to mask the true ownership of fishing companies.
The person who ultimately profits from a fishing vessel is known as the beneficial owner, and there are several reasons why that person may want to conceal their identity, says Duncan Copeland, executive director of nonprofit Trygg Mat Tracking, which recently published a report detailing complex company structures in the fishing industry.
Owners looking to reduce their legal or financial liability can hide behind a maze of shell companies—a tactic that was famously exposed by the Panama Papers. People who are knowingly engaging in criminal activity, or who want to conceal their assets, may choose to funnel fishing revenue through accounts in a tax haven, such as the Cayman Islands or Seychelles.
Unscrupulous owners also tend to set up companies in countries with more relaxed—or non-existent—fishing oversight, including known flags of convenience states, adds Copeland. “It’s all part of a broader strategy to make money. And these companies are making money by bypassing the rules.”
According to Copeland, beneficial owners tend to be based in one of the top five distant-water fishing nations: China, Taiwan, Japan, South Korea, and Spain. That comes as no surprise, he says, because these countries already have the vessels and infrastructure to access fishing grounds outside of their own national waters.
While beneficial owners line their pockets, coastal communities pay a steep price. Ghana’s small-scale fishing sector provides food and employment to 2.7 million people, but catches of sardinella have declined by 80 percent within the last two decades due to unsustainable fishing pressure, says Victoria Mundy, head of research at EJF. “The fishers are reporting increasingly that they are returning from sea with no fish at all,” Mundy says.
But when it comes to enforcing a penalty for illegal fishing, unraveling these complex business structures is often beyond the means of resource-strapped authorities. So, when the beneficial owner hides behind a front company, as with the Lu Rong Yuan Yu 956, fines simply go unpaid. As a result, governments miss out on money that could help fund fisheries monitoring programs, says Dyhia Belhabib, principal investigator of fisheries at Ecotrust Canada.
To rein in foreign fishing and prevent the collapse of fish stocks, transparency and disclosure are key, says Mundy. Encouragingly, an effort to create a publicly available register of ships’ true owners is already underway in Ghana.
Cracking down on beneficial ownership in distant-water fishing nations is a must, says Copeland, including requirements for companies to disclose their involvement in overseas fishing operations. Governments should also mandate that companies provide details of their ownership arrangements when applying for fishing licenses, and screen out companies with opaque structures, adds Mundy.
This two-pronged approach would squeeze the life out of illegal fishing outfits, says Copeland. “Ultimately, we want fishing companies to see that the best way for them to make money is to operate legally.”