New guidance to help countries improve beneficial ownership reporting under the EITI.
Designing a data collection process for company beneficial ownership information can be challenging. EITI countries are making progress on establishing frameworks for disclosing the real owners of oil, gas and mining companies. In many countries, this is a major reform. In the meantime, there are opportunities to improve the beneficial ownership information disclosed in EITI Reports.
Around twenty EITI countries have so far tried to include beneficial ownership data in their reports. A review by the EITI of the latest EITI disclosures from ten countries showed that only about 20% of the companies that were asked to disclose their beneficial owners actually did so. The information disclosed did not always include more than the name of the owner. It often lacked other details such as nationality, date of birth, country of residence and contact details. Most of the reports did not disclose how the beneficial owners exercise their influence on company activities (i. e. means of control). This means that although countries are getting more experience and knowledge of challenges related to beneficial ownership reporting, the quality of the reporting of this information has not necessarily improved. As a result, the data might not yet help with addressing issues such as tax evasion and corruption in the extractive sector (some of the benefits of ownership transparency are explained in this video).
While these results might not seem encouraging, countries that have started to identify the key challenges to collecting this data are still in a better place than when they started. Already, piloting beneficial ownership disclosures in the run up to 2020 helps test and improve reporting guidance, definitions and thresholds and identify legal and practical obstacles. Many of the reports also recommend the government to establish registers and improve the legal framework for beneficial ownership disclosure, which EITI multi-stakeholder groups including government, company and civil society representatives can follow up on.
The findings from the review suggest that countries planning to collect beneficial ownership data though EITI reporting will have to take action to improve the information that is disclosed. These countries include (but are not limited to) Albania, Cameroon, Chad, Kazakhstan Kyrgyz Republic, Mauritania, Mongolia, Republic of Congo, Senegal, Sierra Leone, Papua New Guinea, Tajikistan and Ukraine. The EITI has therefore recently developed guidance on how to improve beneficial ownership information in EITI reporting and are organising a global Beneficial Ownership Conference in Jakarta later this month. The Conference will look into issues such as establishing as a legal framework, setting up a beneficial ownership register, ensuring that the data is reliable and how to reach out to companies and provide appropriate guidance (visit the conference website for more details).
Four selected lessons learned from EITI reporting thus far…
- Talking to industry - consulting with companies and explaining the benefits of beneficial ownership transparency is key. If companies are unfamiliar with beneficial ownership reporting, it can be useful to reach out to them in advance to explain the requirements or find ways to communicate the benefits of ownership transparency. (An example is the beneficial ownership fact sheet for companies developed by the EITI, which can be tailored to fit the national circumstances.)
- Being clear on what’s being asked for and developing clear company guidance. Lack of appropriate guidance and instructions for companies requested to report their beneficial owners is a common reason for data not being comprehensive. Experience has shown that many companies are unfamiliar with beneficial ownership reporting. This means detailed instructions for how to apply the beneficial ownership definition is needed, so that they can identify their beneficial owners. Other challenges include limited follow-up with companies when information has been incomplete, or insufficient time for companies to respond.
- Clearer presentation of beneficial ownership data in EITI reports and use of data standards. The way beneficial ownership data are presented in EITI Reports varies considerably from country to country. In some cases it has been difficult to make sense of the data as the distinction between legal and beneficial ownership has been unclear. Requesting that data be presented in open data formats will enable further analysis and interrogation of the information. EITI countries could also consider using the OpenOwnership register to facilitate sharing and use of the data across jurisdictions.
- Making use of asset declarations to help identify beneficial owners who are politically exposed. It is often difficult for company representatives submitting the data to know whether their beneficial owners are politically exposed persons (PEPs) and to submit this information. Only one or two countries have been able to collect information on whether beneficial owners reported by companies are PEPs.. If declarations made by PEPs of their assets in the extractive sector are made publicly available by the government, such information can be drawn from to help identify beneficial owners who are politically exposed.
These are only a few of the lessons from recent EITI reporting, and wider lessons related to beneficial ownership disclosure will be at the forefront of the discussions at the EITI Conference on Beneficial Ownership later this month.
Visit our page one beneficial ownership for further EITI guidance on beneficial ownership disclosure, including on beneficial ownership definitions, data verification, level of detail, data collection and publication and Politically Exposed Persons (PEPs), as well as tools to include beneficial ownership information in EITI reporting including the beneficial ownership model declaration form.