There are various global and regional efforts to improve collection, sharing and disclosure of beneficial ownership information across jurisdictions. These include the Financial Action Task Force (FATF), the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes. The European Union is also making progress with the implementation of the 4th Anti-Money Laundering Directive setting a common standard for beneficial ownership registers in the EU and ongoing efforts to establish a central register. The EITI has a global standard for beneficial ownership disclosure in the extractives. The purpose of this session was to take stock of global developments related to beneficial ownership transparency and explore opportunities for synergies and collaboration.
The session was chaired by Putri Rahayu, International Cooperation Specialist, Corruption Eradication Commission, Indonesia, with inputs from Jeffery Isima, Inter-Governmental Action Group against Money-laundering in West Africa; Kathleen Kao, Tax Policy Analyst, Global Forum on Transparency and Exchange of Information for Tax Purposes; Jonas Moberg, Head, EITI International Secretariat; Kiagus Ahmad Badaruddin, Head of the Transaction Reports and Analysis Center (PPATK), Indonesia; and Tonusree Basu, Civil society engagement programme officer, Open Government Partnership.
In comparing the existing standards, panellists agreed that global frameworks have different entry points that are unique to the purposes that they are trying to achieve. FATF was mainly focused on anti-money laundering. Global Forum was inspired by FATF, but with a focus on tax evasion and without coverage of PEPs and counter-terrorism financing. EITI was sector specific and the only standard requiring public access to beneficial ownership data. OGP was an important entry point for country commitments on beneficial ownership.
One of the key challenges for all standards was to move from commitment to action, and from laws to implementation. Within FATF, only one country had achieved compliance with the effectiveness requirement related to beneficial ownership transparency. Within the Global Forum, it was often the case that notwithstanding having laws in place authorities could not always access the data. OGP noted that sometimes commitments remain on paper and that legislative harmonisation was a challenge in terms of implementation.
There was a need for greater cross-sectoral, cross-jurisdictional and cross-standard collaboration. Some participants suggested that this could include harmonisation of thresholds defining who could be considered a beneficial owner, or a recommended standard for what thresholds should be used. Others argued that definitions of beneficial ownership and thresholds for who could be considered a beneficial owner should be tailored to the purpose of the various standards and disclosure frameworks. For example, in the extractive industries there was perhaps a case for a lower threshold for could be considered a beneficial owner of an oil company, given the often high profits. It was also noted that greater collaboration could help shed light on what would be appropriate sanctions for non-reporting or false reporting, even if sanctions would be different depending on whether the disclosure requirement was within a sector specific law or a general company law.
Summary/key points from the discussion
The meeting opened with an impressively detailed Video presentation from Andres Knobel (Consultant, Tax Justice Network). His presentation explored the differences between different legal entities (companies, partnerships and foundations) and legal arrangements like trusts and the transparency risks associated with each. A joint venture (e.g., an oil project) may have a combination of these different entities and arrangements:
Andres highlighted the importance of beneficial ownership reforms in addressing transparency and corruption risks. He also introduced the financial secrecy index, which provides detailed information on each country. (Note: An estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world). There was then a discussion about progress with the 5th Anti-Money Laundering Directive (“5AMLD”).
The next presentation was from Rimawan Pradiptyo. He noted that only 172 million (out of 260 million) Indonesians have tax identification numbers, and that completing this work should be a priority. Building on the above, he highlighted the range of different company types in Indonesia, and the complex supervision arrangements, including different arrangement for different sectors. This leads to inconsistent / heterogeneous regulation of beneficial ownership – hence the need for a presidential decree.
Maria Tambunan from the Tax Centre at University of Indonesia presented several different examples on tax avoidance strategies that are used in Indonesia, focussing on the use of debt (and interest payments) and small shares that fall below beneficial ownership disclosure thresholds.
Background: The EITI requires that if a politically exposed person owns oil, gas and mining assets then this ownership must be transparent. Such disclosures could most usefully be linked to existing asset disclosure requirements for government officials.
Objectives: This session focused on reporting obligations of politically exposed persons (PEPs) and on opportunities for mainstreaming EITI’s requirements related to this. It also sought to compare asset disclosure mechanisms in EITI member countries, drawing on the experience of Afghanistan, Indonesia, and Ukraine particularly.
Participants: the session was facilitated by Alessandra Ordenes, Regional Director at the EITI International Secretariat, with presentations from Cari Votava, Senior Financial Sector Specialist working in Financial Market Integrity, World Bank; Tetiana Shevchuk, Anti-Corruption Action Center, Ukraine; Ghazaal Habibyar, Deputy Minister of Mines and Petroleum, Afghanistan; and Maryati Abdullah, National Coordinator, PWYP Indonesia
The Panel began by reviewing the key prerequisites for an effective identification of PEPs and an implementation legislation. First, global standards, such as the FATAF guidelines, do not provide operational definitions of PEPs. Definitions of PEPs must be adapted to the local context. To be effective, this definition should be as clear as possible and leave no room for discretionary interpretation so as not to empower corrupt individuals and vested interests. It should cover the civil service and other branches of government, including the military, judiciary, parliament, diplomatic corps, and state-owned enterprises, and include job titles and grade level. The legislation should only cover public officials receiving a government salary, as well as close associates and family. It should also include specific dispositions to cover foreign PEPs, who may have financial or economic interests in the country. The definition of PEPs should not extend to NGOs or the private sector (other than SOEs). Finally, panellists agreed that to be effective, legislation and regulations on PEPs legislation must be easily accessible and disseminated widely to enable international cooperation.
The panel ten reviewed existing mechanisms to asset disclosure. Panellists agree that it was critical to prioritize the public interest, over exaggerated concerns of public officials over security and confidentiality. To effective there must be a sanction for not disclosing assets. In order to be effective, sanctions for non-disclosure of assets should not be exclusively monetary in nature. Cutting off one’s salary or removing an individual from public office have often proven to be more effective. A criminal penalty can also be effective in enticing public officials to disclose their assets.
Asset declarations are often not sufficient. In many countries, powerful and corrupt individuals tend to get away, while the more honest public officials are targeted. To be effective, an asset declaration implementation mechanism must be built incrementally. Compliance should be the first building block. Lifestyle checks can then be added to the system, as well as open contracting and beneficial ownership registers. In the case of Ukraine, PEPs are encouraged to declare their property and the use of this property. Fear of criminal prosecution has proven efficient to encourage PEPs to disclose their assets.
In closing, participants encouraged the EITI International Secretariat to develop a guidance note to help implementing countries link up beneficial ownership reforms promoted under the EITI to on-going PEPs and assets declaration implementation.
The workshop on how to establish a legal and regulatory framework gathered over 40 participants, representing different government agencies, companies and civil society organisations. The session was facilitated by Erica Westenberg, Director of governance programs, NRGI. The speakers:
- Mavis Amoa, Head of Legislative Drafting Division, Ministry of Justice, Ghana
- Matthew Ray, Deputy Director, Business Frameworks, Department for Business, Energy and Industrial Strategy, United Kingdom
- Oleksiy Orlovsky, Democratic Practice Program Initiative Director, International Renaissance Foundation, Ukraine
- Ruslan Baimishev, Director of Subsoil Use Department Ministry for Investments and Development, Kazakhstan
- Yunus Hussein, Former Head of Financial Transaction Reports and Analysis Centre (PPTAK), Indonesia
During this session participants discussed different legal approaches to beneficial ownership transparency and tried to identify good practices in terms of mandates, confidentiality issues, enforcement, etc. Moreover, invited speakers reflected on challenges in creating legal and regulatory framework that their countries (Ghana, Indonesia, Kazakhstan, Ukraine, UK) have already faced.
The session started by short presentations from Mavis Amoa, Oleksiy Orlovsky and Matthew Ray on the good practices and challenges in legislating beneficial ownership in Ghana, Ukraine and the UK.
Mavis Amoa presented recent reforms in Ghana and mentioned that it is important to remember that each country is different – has different Constitution, existing legal background, legal reforms – and it should be taken into account when working on the legislation in each specific country. Provisions on beneficial ownership transparency can be incorporated in existing laws or can be included in a single separate law. But no matter which option is chosen, it is essential to make sure that other laws do not contradict and are coherent with beneficial ownership provisions. Moreover, the aspects of verification and access to information were highlighted as crucial to the beneficial ownership disclosure. Monetary penalties, administrative and criminal responsibility were mentioned as penalty tools in case of not providing information or providing false information. Additionally, several legal reforms were mentioned to be underway, including development of legislation on common reporting standards and asset disclosure of assets for PEPs to avoid tax evasion. All of these pieces of legislation are expected to form together an efficient anti-corruption legal background.
Oleksiy Orlovsky shortly summarised beneficial ownership reforms that took place in Ukraine over last two and half years in Ukraine. In 2014, a register of legal entities was edited and an additional field on beneficial owners was added there. Staring from 2015, the information about the beneficial owners was required to be disclosed in the state register in addition to information about the founders. The second wave of beneficial ownership disclosure reforms happened in September 2016 when e-declaration system was established. At present moment about 600 000 officials completed their declarations. In this register, there is a separate field in which each official should declare the list of the companies in which he/she is the beneficial owner. This information is currently widely used by investigative journalists and media. However, there are also some challenges related to implementation of beneficial ownership legislation that the country is facing now. For example, number of companies who disclose their information remains rather low. According to current legislation everyone controlling over 25% of the company should report. But as there is no official institution to control reporting, it is estimated that only less than 20% of the companies provide information on their beneficial owners. Identification of the responsible institution and increase of the amount of penalty (now maximum penalty is about 330 US dollars) are considered to be the main ways of tackling this problem. Additionally, it is expected to make the register more user-friendly and standardise transliteration in order to make the registrer more useful both in Ukraine and globally.
Matthew Ray followed up with presenting timeline of legislations in the UK. The register was implemented in summer 2016 and by now over 3.5 million companies have complied with the new beneficial ownership requirements. The main principles that the UK Government is following when developing and improving legislation framework for beneficial ownership framework are the following:
- Openness and transparency are good for business and promote high standards of business behaviour and corporate governance. Therefore, beneficial ownership requirement should be seen as a part of already existing company law framework, should apply to all sectors, and the register should be made public.
- Simplicity and comprehensibility. If the legislation is too complicated, no one will benefit from it. Therefore, international definitions were applied in the UK and the FATF and other international standards were considered. Moreover, the UK Government made sure that the format of the data is searchable and understandable. Additionally, the main sanction duties are put on the companies’ directors who are given a right to check information and send notice on others in case of seeing false information.
- The regulations and sanctions should be proportional and reasonable. According to data protection standards, once a public register is functioning, it will be decided on what information can be made publicly available. For example, date of birthday might only include month and year.
During the first Q&A session, a use of beneficial ownership by different institutions and collaboration between different agencies was discussed. While it was agreed that company register is a good solution for a lot of countries, it was also mentioned that there might be limitations related to the fact that not all extractive companies, especially international without subsidiaries in the country, might be necessarily included there. Additionally, different types of sanctions were discussed. Matthew Ray mentioned that criminal responsibility might have a timeframe as a downside, meaning that the action would not be taken immediately and the sanction process might take relatively long time.
The session continued by short presentations from Ruslan Baimishev and Yunus Hussein on the reforms in Kazakhstan and Indonesia.
Ruslan Baimishev briefed participants on the recent reforms in Kazakhstan. In 2017 a new Code on Subsoil and Subsoil Use was developed based on Australian system of subsoil use. In Kazakhstan, the approach when the beneficial ownership is implemented not only because it is a requirement, but because there are additional benefits from disclosing such information. For example, in Kazakhstan a question of multi-vector policy is very relevant and beneficial ownership disclosure plays important role for international relations. In draft Code on Subsoil and Subsoil Use, the definition of beneficial owner is not provided, but instead of it definitions of “ownership” and “control” are incorporated as these terms are also used in other laws. Therefore, beneficial ownership will be disclosed by providing information on the individual who directly or indirectly controls the company. We believe that some data should be public, but it is important to be careful with it and find optimal regulations as some parties might speculate on that data (e.g., ask government to take away the license). More specific rules and details are expected to be included in bylaws.
Yunus Hussein provided financial sector perspective on the beneficial ownership disclosure legislation. Indonesia currently is still working on the legal framework for beneficial ownership. There are four registers available nowadays and each of them includes different information. Moreover, the confidentiality provisions do not always allow to disclose all needed information. However, interagency cooperation and further development of beneficial ownership legislation is one of the Governments’ priorities.
During the second round of Q&A, participants provided relevant examples from their countries and invited speakers elaborated further on beneficial ownership definitions in their countries, agencies responsible for management of registers as well as challenges in their countries and ways to tackle them.
In conclusion, participants of the workshop agreed that the approach to building the legislative framework should be based on the best international practises, but customised in each country according to legal peculiarities and in the way that would maximise implementation effectiveness. Additionally, risk analysis was mentioned as crucial action to ensure that beneficial ownership registers help to prevent, not protect, corruption.
When building a beneficial ownership (BO) register, as in most things, the devil is often in the details. Workshop 10 looked at the experiences of countries that have already come some way in building such registers and the challenges facing those who are currently doing so. The session was facilitated by Emanuel Bria, Indonesia Country Manager, NRGI Indonesia, with contributions from:
- Olena Sukmanova, Deputy Minister of Justice, Ukraine
- Steve Webster, Assistant Director, Corporate Transparency, United Kingdom
- Freddy Harris, Director General of Legal Administration Affairs, Ministry of Law and Human Rights, Indonesia
- Tariq Ajhmed Sarfaraz, Director General, Afghanistan Central Business Register
Ukraine and the United Kingdom have already set up public beneficial ownership registers, while Indonesia and Afghanistan are in the process of doing so. On the basis of their experience, panellists concluded that while one size will not fill all, some of the solutions identified by early implementers may. For example, standardization of data in the register and limiting free text through drop-down menus is a simple but effective way of limiting mistakes from the beginning, while using existing architecture such as existing company registers helps interconnectivity and reduces resource use. Likewise, offering free and paid services is a good way to limit general access to all the information in the register while still providing sufficient information to the public. Low-threshold – high-reward strategies, such as setting up feedback mechanisms on company pages to enable the public to alert authorities when the information listed may be incorrect, should be considered from the beginning. Panellists said that this was also the case for agreeing on a process for updating information when ownership changes and to sanction purposefully false entries. Good cooperation with law-enforcement agencies will be needed to ensure compliance, while adopting a risk-based approach to checking data quality ensures that the system is not bogged down by unnecessary procedures.
Panellists agreed that there are some common challenges that beneficial ownership registers continue to struggle with. In countries with several official languages or with different scripts, like Ukraine or Afghanistan, the transliteration of company and proper names poses a particularly difficult challenge. What to do once companies’ ownership structures cross national boundaries was another such challenge. Whereas the UK had to some degree solved this by enabling companies to serve notice to the government when third parties do not comply with information requests, panellists noted that putting the burden on the overseas owner and sanctioning when they do not comply was more relevant for a financial hub like the UK than it would be for many other countries. In terms of key priorities, panellists agreed on the need to establish a legal framework for the registration of companies. As one participant said, at the end of the day whatever system is in place will only be as good as the information that is put into it – which in turn will only be as good as the regulations in place mandating company registrations.
Background: More than 20 of the EITI’s member countries have announced in their beneficial ownership transparency roadmaps that they aim to establish public beneficial ownership registers. There is no one way of doing this, and countries are taking different approaches.
The workshop gathered 35-40 participants from a wide range of organisations, government agencies and companies. The session was facilitated by Yanuar Nugroho, Deputy Chief of Staff at the Office of the President and member of the OGP Steering Committee in Indonesia. Joining him in making contributions were:
- Chesna F. Anwar, Compliance Director, Standard Chartered Bank;
- Stanley Ford, Assistant Director of Corporate Affairs, Financial Intelligence Unit, Liberia;
- Tetiana Shevchuk, Legal Expert, Anti-Corruption Action Centre, Ukraine and;
- Wahyu Dhyatmika, Investigative journalist and Editor, Tempo.
The aim of the session was to share best practice in investigating beneficial ownership and introduce tools that can assist in data analysis, in particular to share specific experiences from civil society, company, and government perspectives.
The panellists largely agreed that analysis of beneficial ownership information is difficult but fully possible. However, it is not feasible without complementary information such as transactional data – BO-data is not sufficient by itself. They also highlighted that country-contexts mean that there will be differences in the precise solutions to various challenges and issues concerning beneficial ownership transparency. However, the challenges are also similar enough to warrant the sharing of experiences across countries, sectors and regions. Therefore the panellists highlighted the importance of training of all stakeholders in analysis of BO-data, and that information should be shared in open data formats to help make sense of and use in investigations.
The workshop began by panellists sharing specific examples from their own experiences, citing that the outcome of the Panama Papers leaks and others would have been vastly different if beneficial ownership information had already been available. Legal and regulatory frameworks need to be put in place to enable these disclosures. It was noted that the access to and use of beneficial ownership data enables us to hold the right people accountable. The publication of beneficial owners, and thereby of their connections to public officials and high-profile individuals, fuels demand for accountability from the general population.
The panel then discussed how corruption can be identified by using BO information. Concealing corruption linked to hidden ownership can be as simple as using the name of relatives, political affiliates or strangers. One example was cited of paying homeless people to register a company, making any verification or investigation extremely difficult. Identifying beneficial owners also means looking into who benefits from specific transactions. Data on transactions is a key source of information to identify beneficial owners. But even when transaction- or BO-data is not accessible, there are clues/red flags in available data to start investigations.
The session ended with an exercise for all participants (see the attached exercise). Panellists shared typical red flags that may indicate corrupt behaviour in Ukraine, and asked participants to identify the same indicators for two real-life cases from Ukraine.
Summary/key points from the discussion
Experience with the EITI beneficial ownership pilot showed that a major challenge with obtaining consistent quality beneficial ownership information was the lack of guidance to companies on how to define and identify their beneficial owners. This session aimed at sharing lessons learnt, challenges and good practices in terms of outreach, awareness raising and guidance to companies to ensure effective implementation of beneficial ownership disclosures.
This session was chaired by Matthew Ray, Deputy Director, Business Frameworks, Department for Business, Energy and Industrial Strategy, with inputs from James Ensor, Executive Director, BHP Billiton Foundation, Australia; Wimboh Santoso, Chairman, Financial Services Authority, Indonesia; Godwin Okonkwo, General Manager, Group General Account, Nigerian National Petroleum Corporation; and Syahrir Abubakar, Executive Director of Indonesian Mining Association; and Karim Lourimi, Moore Stephens.
Panellists agreed that beneficial ownership disclosures made sense from an economic and ease of doing business perspective, but to be efficient the disclosure framework must be geared towards producing reliable and useful information.
Panellists noted that open registers contributed to level the playing field among companies from various jurisdictions. Several multinational corporations (MNCs), including BHP Billiton, began rallying around the beneficial ownership transparency agenda following the Panama Papers leaks, which epitomized the increasing lack of trust in corporate tax practices. Not only did open beneficial ownership registers contribute to the restoration of public trust in MNCs’ tax practices, they also provided an additional tool for companies’ due diligence with potential business partners. It was in the interest of companies to take part in the policy making process related to the establishment of BO legislations and registers to ensure that the information required from them was as useful as possible.
However, further efforts were needed to build industry awareness on the concept of Beneficial Ownership and to ensure consistency in definition, scope, and approaches to disclosures across jurisdictions.
Several panellists noted that it was still a challenge to convince companies to disclose their beneficial owners. In many cases, local companies and MNCs were reluctant to report this information as they did not understand the concept of beneficial ownership and the reason for such a requirement when information on their legal ownership had already been disclosed. More outreach to the senior management of companies and company lawyers was required to ease this resistance. Governments would be best placed to engage with companies on this matter when companies were looking to invest in a country.
Large companies sometimes faced other specific challenges in reporting due to the complexity of their ownership structures. It often required more time for them to collect beneficial ownership, as they needed approval of their shareholders and had to navigate through a complex system of shell companies.
EITI implementing countries needed to establish a stronger link between beneficial ownership reporting and existing AML and PEPs legislations and regulations, as well as with data protection legislations. Further practical guidance and templates were needed to help companies identify their beneficial owners. It was also important to evaluate beneficial ownership disclosures and document lessons learned to improve the process. It was also important to encourage cooperation and data exchange across jurisdictions.
Several panellists noted that establishing beneficial ownership registers required long-term planning. It was key to get the definition and principles right for future implementation to be effective. They agreed that companies would gradually comply with beneficial ownership requirements and realise the reputational benefits of providing such data.
Summary/key points from the discussion
The workshop gathered 20+ participants from a range of organisations, governments and companies, including open data practitioners. The session was facilitated by Jack Lord, Beneficial Ownership Lead, Open Data Services Co-Operative, United Kingdom. Joining him in making contributions were:
Abdoul Malick Tapsoba, Head, Burkina Faso Open Data Initiative (BODI), Burkina Faso;
- Antya Widita, Lab Manager, Web Foundation Indonesia, and;
- Yanuar Nugroho, Deputy Chief of Staff, Office of the President of Indonesia, and member of the OGDP Steering Committee.
The aim of the session was to consider options for disclosing beneficial ownership information in open data formats, including the application of a beneficial ownership data standard.
The panellists agreed that open data on beneficial ownership (BO) is at a very early stage. Only the United Kingdom and Ukraine have full public registers, with other partial sources of data available from Slovakia and EITI beneficial ownership pilots. The workshop introduced an existing open data standard for describing beneficial ownership, developed by OpenOwnership, the Beneficial Ownership Data Standard. It linked some of the challenges faced by beneficial ownership transparency advocates to those overcome by existing open data projects.
Panellists argued that there is a need for broad coordination and cooperation among stakeholders to ensure that beneficial ownership data responds to the demand for information, both at regional and local levels. Standards alone will not be enough for beneficial ownership transparency to succeed, their advantages will need to be explained to stakeholders and local champions will be crucial for implementation. Linking to wider open data commitments, such as the Open Government Partnership and Open Data Initiative, was also identified to ensure broader coordination and interest for beneficial ownership data.
Audience contributions also brought out the potential for data standards on beneficial ownership disclosure to link up with standards to describe sanctioned natural persons (an anti-terrorist financing use case) and PEPs (an anti-corruption use-case). Publicly Exposed Persons (PEPs) registries, as well as binding laws and regulations were cited as the most difficult areas in ensuring open data disclosures including beneficial ownership information. Solutions to navigate around individuals with vested interests in hindering open data disclosures were therefore discussed. As most of the information is already created with government or public funding some participants argued there is no reason why the information should be kept confidential – the public has a right to know about government expenditures.
Some participants highlighted that regulatory, institutional, and accountability frameworks are needed to create open databases. A common challenge here is there are often misconceptions and resistance against open data and data standards, without a complete understanding of the concept. In open data, ‘standards’ can mean developing a holistic process for collecting, validating and publishing data, where no such process existed before. It could also be raising awareness among stakeholders about existing data format standards and best practices, like the use of metadata and clear licensing. Data portals, and Indonesia’s policy of ‘One Data, One Map’ and the Burkina Faso Open Data Initiative, emerged as strong solutions to the problem of providing a single-source-of-truth to data users.
The session closed with questions regarding the relevance of open data in certain countries. Participants at the workshop expressed concerns that countries with lower technical capacity cannot perform open data disclosures; larger portals and open data platforms are often not feasible and lower digital literacy is an obstacle for effective use. Panellists argued that open data does not imply large databases and data portals, but can be in the form of simpler solutions such as excel-file attachments or downloads. It was highlighted to start with the simplest solutions and move from there – once data is published agencies must respond to the feedback of data users and ensure that the disclosures respond to the demand.
“Instead of debating the term 'open data', Indonesia sticks to its principles instead. We defined and developed our very own 'One Data' which actually implements the principle of open data. Sometimes people are concerned more about the name, not the practice” – Yanuar Nugroho, Deputy Chief of Staff, Office of the President, Indonesia and member of the OGDP Steering Committee.
“A country’s capacity to publish information in open data formats comes from practice, not feasibility studies.” – Abdoul Malick Tapsoba, Head, Burkina Faso Open Data Initiative (BODI).
Beneficial ownership information should be useful and accessible to stakeholders within the government and beyond. To accommodate a sufficient degree of flexibility to various user needs, the information should be accessible in open formats enabling analysis and combination with other data sets. This implies a need for interoperability with external beneficial ownership databases and for registries including ownership chains to be linked.
This session could consider options for disclosing beneficial ownership information in open data formats, including the application of a beneficial ownership data standard. It could showcase the potential for analysis and visualisations of beneficial ownership data once published in open data formats, and allow participants to interact with different data sets.