A face to the name: How government and industry can use ownership data to strengthen anti-corruption efforts

EITI Global Conference: Executive Session 5

Session Summary

The executive session explored the good practice examples and illustrated the different ways in which beneficial ownership (BO) disclosure has benefitted both, government and companies. It focused on diverse cases in which BO disclosure served as a mechanism for data verification, while catalyzing and giving way to different synergies amongst growing disclosure requirements.

Speakers also shared their experiences in coordinating responses to the risk identified, from the companies and government perspective, and discussed their plans for meeting the 2020 deadline established in the standard for publishing BO information for oil, gas and mining industry.

Speakers

Moderator: Ms Nicole Bieske, Head of Programme, Mining for Sustainable Development, Transparency International

Speakers:

  • Hon. Mohammed Amin Adam, Deputy Minister of Energy, Ghana

  • Hon. Ekmat Baibakpaev, Member of Parliament, Kyrgyz Republic

  • Mr James Ensor, Executive Officer and President, BHP Foundation

  • Mr Charlie Cox, Associate, Risk Advisory Board

  • Ms Laury Haytayan, Middle East and North Africa Director, NRGI

Session Details

The session was moderated by Nicole Bieske (Head of Programme, Mining for Sustainable Development, TI), and brought together speakers from government, industry and civil society. The panelists discussed how BO information can support governments and companies in their anti-corruption efforts, and the ways it can act as a factor leveling the playfield. The debate went further than the reasons for BO disclosure, or the challenges and risks of not knowing the ultimate owners of extractives holders, and focused on the mutually reinforcing and common interests of companies and governments on the matter. Government representatives shared the progress they have made on reforming and harmonizing their legislations regarding the collection and publication of BO, and also explained how they have used the OGP and EITI platforms jointly to build political momentum and ensure inter-agency coordination. From the companies’ perspective, the emphasis was put on how BO transparency is good for business, by making it difficult for competitors to be corrupt and facilitating due diligence requirement, mostly in terms of supply chain. Finally, from the side of civil society, the main issue brought on the spot was the connection between BO and Politically Exposed Persons (PEPs), and the need for linking these two concepts for guaranteeing better and more efficient implementation of the regulation.

Hon. Mohammed Amin Adam (Deputy Minister of Energy, Ghana), mentioned BO screening and disclosure has played a fundamental role in the bidding rounds for oil blocks, guaranteeing better bidders and leveling the playfield. He explained, for example, that in the latest bidding round, where BO information was required for companies to be pre-qualified, only two were not publicly listed, and what happened was that one of them was disqualified, while the other reported their beneficial owners to the Petroleum Commission.

Hon. Ekmat Baibakpaev (Member of Parliament, Kyrgyz Republic), described the new laws in his country that require BO disclosure for mining companies. He focused on the significance of this requirement and explained that if companies do not provide this information, or the information is incorrect, this gives way to a revocation of the license is revoked.

James Ensor (Executive Officer and President, BHP Foundation) highlighted BO transparency as a practice that is useful for business as it levels the playing field by making it difficult for competitors to be corrupt: “It is a method for discouraging corrupt corporate behavior”. In this sense he focused on debunking the common narrative of company resistance to BO disclosure, and underscore the useful aspect that BO disclosure brings along for the corporate side. He also mentioned that, as BO transparency becomes the norm, the the failure to disclose should be regarded as a red flag.

Charlie Cox (Associate, Risk Advisory Board), explained that his clients need access to BO data, particularly regarding the companies they conduct business with. The main reasons for this, he said, are two: (1) regulatory, most companies are subject to some extraterritorial anti-corruption legislation; (2) and commercial, the data informs operational considerations. Consequently, updated and accurate BO data can facilitate enormously due diligence requirements, while at the same time these processes can become much more cumbersome if there is a lack of access to official BO information. In connection to this, Cox emphasized that the availability of information is not enough, and its verification is highly relevant.

Laury Haytayan (Middle East and North Africa Director, NRGI), focused on the need for connecting BO with PEPs. She emphasized that, on all of the advocacy conducted by NRGI regarding the enhancement of BO transparency, the issue that is lagging the most is this link, which plays a fundamental role if the data is to be used efficiently for tackling and preventing corruption. She also drew on the relevance of establish in advance the different ways in which the data will be used. This, she highlighted is a fundamental aspect for effective policy design, and central to launching the corresponding mechanisms for sharing the information (e.g. open data format). Having clear provisions about these matters on the law, simplifies the implementation and can guarantee a better use of the BO data.

 

Q&A

The questions were centered on how to best verify the BO information reported by companies, whether companies had better access to BO data in EITI countries than in non-EITI countries, and how to best access data when company structures cross various jurisdictions.

Background

The challenges and risks of not knowing the ultimate owners of extractives holders are well known and documented across resource-rich countries. Hidden ownership in the extractive industries has contributed to major corruption scandals involving conflict of interest in the awarding of licenses, as well as illicit financial flows and revenue losses. To help address these challenges, 52 EITI countries have committed to publish the beneficial owners of companies that apply for, or hold a participating interest in oil, gas or mining licenses or contracts by 1 January 2020.

The Global Conference will mark the 6-month run-up period to this deadline. This creates a timely opportunity to convey a unified, clear message on concrete strategies for making such processes effective and impactful. This parallel session is aimed at allowing government and industry representatives to showcase their procedures and practices to reduce corruption risks with a focus on beneficial ownership screening.

Even though progress with disclosing beneficial ownership information has varied across EITI countries, the session intends to shed some light on how to build on existing systems to fulfil requirement 2.5. The main objective of the session will be to provide a practical lens and demonstrate why and how beneficial ownership information is valuable to companies and governments alike.

Many countries are also considering disclosing ownership information on companies beyond those operating in the extractive sector. The session will also include a brief overview of the anti-corruption research by organizations like NRGI and TI, on beneficial ownership in the licensing process, on subcontracting, and in business integrity to foreground why robust practices are needed and what these practices involve.