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Armenia

Beneficial Ownership Register (AM0037)

Overview

At-a-Glance

Action Plan: Armenia Action Plan 2018-2020

Action Plan Cycle: 2018

Status: Active

Institutions

Lead Institution: Ministry of Justice

Support Institution(s): State administration bodies FOICA, Transparency International, Armenian Lawyers' Association

Policy Areas

Anti-Corruption Institutions, Beneficial Ownership, E-Government, Extractive Industries, Legislation & Regulation, Open Data

IRM Review

IRM Report: Armenia Design Report 2018-2020

Starred: Pending IRM Review

Early Results: Pending IRM Review

Design i

Verifiable: Yes

Relevant to OGP Values: Access to Information Civic Participation , Technology

Potential Impact:

Implementation i

Completion:

Description

3. Open and public beneficial ownerships’ register
Commitment Start and End Date Commitment Start: November 2018
Commitment End: December 2020
Lead implementing agency Ministry of Justice
Person responsible from lead implementing agency Mariam Galstyan
Title, Department Head of Anti-Corruption Policy Development Division of Anti-Corruption and Penitentiary Policy Development Department

Email: mariam.galstyan@justice.am Phone +37410-594023
Other actors involved Other state actors involved State administration bodies
Civil society, private sector FOICA, Transparency International, Armenian Lawyers' Association
Issues subject to regulation Although the legislation in the Republic of Armenia (RA) prohibits public officials to be engaged in business activities, the lack of information about the ultimate beneficial owners of legal entities may actually enable the violation of this requirement and contribute to the spread of corruption.

After the Velvet revolution in the spring of 2018 the new government launched a real and effective fight against corruption and the disclosure of information about property owners can significantly contribute to the realisation of the government’s ambitions. With this commitment the government will adopt international beneficial ownership transparency standards and will monitor abuses of company ownership for illegal purposes. Taking into account the open will of the new government to eliminate corruption in all spheres, government of RA pledged to ensure the publicity of data on the real owners of companies operating in the country.

Main objective The main objective of the commitment is to open information on companies’ real owners to prevent and identify the misuse of company ownership for corruption offenses.

The publication of information of companies’ real owners will also support tax and law agencies to enforce the laws and regulations more effectively and carry out their functions and activities. The transparency of such information will promote the engagement of citizens in the fight against corruption and can increase trust in government. At the same time, it can have a positive effect in increasing investments in the Republic of Armenia.

Brief Description of Commitment The Government is committed to develop and implement a common mechanism for identifying the real owners of companies operating in RA, by creating and launching a comprehensive open and freely accessible register of beneficial ownership.

OGP challenge addressed by the commitment Publicity, accountability, enhancement of public integrity, innovation

Relevance to OGP values The Register will provide access to actual owners’ information, increase public confidence, increase transparency and public control, and thereby improve the accountability of companies.

Ambition The commitment is exclusive for Armenia and other OGP member countries. Armenia will have an effective tool for Civil society and the State agencies to determine the ultimate beneficial owners in all sectors of the economy operating in RA. This commitment is a comprehensive and inclusive program, which will lead to positive changes including a huge impact on the fight against corruption and money laundering. By doing so, Armenia will join the group of pioneer countries in the field of Beneficial ownership transparency.
Promotes efforts for implementation of SDG Goals or Targets 16.5 Substantially reduce corruption and bribery in all their forms.
17.17 encourage and promote effective public, public- private, and civil society partnerships, building on the experience and resourcing strategies of partnerships.
Verifiable and measurable criteria for performance of commitment Start End
Ongoing Actions
1. Development of a legislative package that establishes the framework necessary to meaningfully advance on beneficial ownership transparency and implement an open register of ultimate beneficial owners.
This legislative package will be based on a comprehensive analysis of international experiences on issues such as the Beneficial Ownership Data Standard, the definition of beneficial owners, verification and registration mechanisms, and the range of required documentation.
In addition, the development of the legislative package will include consultations with stakeholders, such as representatives of civil society and the private sector, and the presentation of a consolidated package to the Prime Minister’s Staff.
2018
November 2019
June
2. Presentation of legislative drafts package to the National Assembly
2019
July 2019
September
3.Development of a database (using the Beneficial Ownership Data Standard) of ultimate beneficial owners of all companies operating in Armenia within the State Registry which will be responsible of the technical implementation and discussions with civil society and the private sectors. The database will be open and freely accessible to the public and ensure adequate use and search capabilities.
2019
May 2019
December
4. Piloting the register by entering data of ultimate beneficial owners of companies in the metal mining industry operating in Armenia. This includes collecting, verifying, publishing, and resolving system problems which are encountered during the pilot.
2019
November 2020
June
5. Launch of an open and public register of ultimate beneficial owners and parallel launch of a public awareness campaign.
2020
October 2020
December

IRM Midterm Status Summary

3. Beneficial Ownership Register

Language of the commitment as it appears in the action plan: [23]

Brief description: The Government is committed to develop and implement a common mechanism for identifying the real owners of companies operating in RA, by creating and launching a comprehensive open and freely accessible register of beneficial ownership.

Milestones

3.1 Development of a legislative package that establishes the framework necessary to meaningfully advance on beneficial ownership transparency and implement an open register of ultimate beneficial owners.

This legislative package will be based on a comprehensive analysis of international experiences on issues such as the Beneficial Ownership Data Standard, the definition of beneficial owners, verification and registration mechanisms, and the range of required documentation.

In addition, the development of the legislative package will include consultations with stakeholders, such as representatives of civil society and the private sector, and the presentation of a consolidated package to the Prime Minister’s Staff. [24]

3.2 Presentation of legislative drafts package to the National Assembly

3.3 Development of a database (using the Beneficial Ownership Data Standard) of ultimate beneficial owners of all companies operating in Armenia within the State Registry which will be responsible of the technical implementation and discussions with civil society and the private sectors. The database will be open and freely accessible to the public and ensure adequate use and search capabilities. [25]

3.4 Piloting the register by entering data of ultimate beneficial owners of companies in the metal mining industry operating in Armenia. This includes collecting, verifying, publishing, and resolving system problems which are encountered during the pilot.

3.5 Launch of an open and public register of ultimate beneficial owners and parallel launch of a public awareness campaign.

Start Date: November 2018

End Date: December 2020

Context and Objectives

Armenian legislation prohibits public officials from engaging in business activities. [26] However, many cases have been reported in which officials have ownership in business companies, with ownership officially registered to other persons (including their relatives or acquaintances). Apart from violating the law, ownership of large companies by state officials contains risks of political influence on business and harms the principle of a competitive business environment. Additionally, lack of information on real owners of companies prevents identification of monopolized sectors and businesses. (It is possible for several businesses to have different registered founders but be owned by the same person.)

The Law on Combating Money Laundering and Terrorism Financing defines the concept of beneficial ownership and provides some regulations for the disclosure of and reporting on beneficial owners. [27] All organizations make a statement on their beneficial ownership during registration and when applying for state procurement tenders. These statements are publicly available for state procurement participants in the reports of the State Procurement System and in participants’ bid packages. [28] However, the information on beneficial ownership filed with the State Registry is not available to the public.

This commitment calls for the creation of a publicly available beneficial ownership registry that will be piloted in Armenia’s mining sector. This commitment will help identify conflicts of interest in cases in which a company is owned by an official. It will also ensure proper tax collection through the revealing of offshore ownership. According to statements by government representatives, the government also plans to develop mechanisms for verifying the provided information before publication. [29] However, the commitment itself does not mandate disclosure of beneficial ownership. It only covers the development of the framework related to beneficial ownership transparency. According to the commitment, the open registry will be operational by the end of the action plan implementation period (October 2020) and will include data on mining companies during the pilot stage. In addition to disclosing beneficial ownership information, Milestone 3.1 calls for consultations with stakeholders and the presentation of a consolidated legislative package related to the establishment of beneficiary ownership register to the prime minister’s staff, making the commitment relevant to civic participation.

This commitment is closely linked with the requirement of the Extractive Industries Transparency Initiative (EITI) 2016 standards to disclose beneficial ownership of oil, gas, and mining companies. [30] As a candidate country to EITI, Armenia has pledged to follow this requirement by January 2020. In January 2018, Armenia published its road map for disclosing beneficial ownership information, including milestones and deadlines. [31]

Many interviewed civil society stakeholders had a positive assessment of the commitment and expect it to eventually cover all companies. However, the civil society organizations that proposed the commitment find that it does not entirely reflect the ambition they intended. They had suggested mandatory disclosure of beneficial ownership. [32] The objective of the commitment is ambitious, but the proposed activities are limited to the creation of the registry software and piloting the registry by including mining companies.

Some stakeholders noted that including a milestone on beneficial ownership disclosure for a larger scope of companies (for example, companies with incomes above a certain threshold) [33] would have an even greater impact in this field. However, the mandatory disclosure of mining companies’ beneficial owners will be a major step. This sector contributed 3.2 percent to Armenia’s gross domestic product in 2017 [34] and has been targeted by several environmental movements. The ownership of mining companies has been a sensitive issue in Armenia, especially in recent years. There is a large amount of foreign investment, with relevant permissions provided by the former government administration. These deals have given rise to rhetoric about alleged ties and interests of officials (or ex-officials) and their lack of care about the damage to country’s natural resources. The most prominent recent case involves the Amulsar mining project, which, according to the environmentalists, endangers one of the well-known resort towns and nearby water resources. [35]

The commitment calls for continued progress in beneficial ownership transparency. Thus, it marks a major (albeit preliminary) step toward institutionalizing beneficial ownership disclosure of companies. Therefore, the potential impact is assessed as transformative. The legislative framework and software required under the commitment will serve as a basis for further enlargement of the scope of companies subject to mandatory disclosure of their owners.

Next steps

The IRM researcher recommends carrying this commitment forward to the next action plan. The government should establish mechanisms for mandatory inclusion of a larger scope of companies in the beneficial ownership registry, as well as mechanisms for monitoring and verification.

Stakeholders have stressed the importance of verifying the possibility of obtaining accurate information on beneficial owners of companies, particularly those in extractives sector. Those companies have offshore registration and use chains of ownership. Thus, real ownership is sometimes not possible to verify. [36] For this reason, mechanisms to verify the information presented in the registry must be established. Otherwise, the registry’s usefulness to prevent corruption will be questionable. [37]

International experience and recommendations should be considered when designing the oversight framework, including the following:

  • Establish international cooperation to provide and obtain information held by foreign and domestic registries, exchange information on shareholders, and quickly trace a chain of legal ownership; [38]
  • Give appropriate resources, capacities, and legal mandate to the registry or the relevant assigned body to carry out due diligence and verification and to apply relevant sanctions; and
  • Set serious penalties for providing false information; these need to be tangible to ensure that the disclosure provisions are met—for example, heavy fines or suspension of activities. [39]

Public oversight is also important, to ensure that the registry will serve its role. The IRM researcher recommends that civil society organizations (CSOs) initiate public awareness activities and conduct monitoring and verification of the disclosed information. Toward this purpose, it is important that the information in the registry is open and free of charge for everyone.

During the discussions for the action plan development, as well as in interviews, some CSOs suggested introducing mandatory disclosure of media company ownership. [40] As noted in Section II of this report, many media outlets have political affiliations or are perceived to have them. Issues such as misinformation or hidden political propaganda by media are often raised. Disclosure of media ownership could improve transparency in the media sector and apply a more deliberate approach to news and media reports.

[23] Government of the Republic of Armenia, OGP Armenia Action Plan 2018-2020, https://www.opengovpartnership.org/wp-content/uploads/2018/12/Armenia_Action-Plan_2018-2020_EN.doc.   
[24] In Armenian version: “Development of a legislative package based on a comprehensive analysis of international experience. The package will include the concepts related to beneficial ownership, registration mechanisms, and the range of required documentation. Provide consultations with stakeholders, including representatives of civil society, and the present the consolidated package to the Prime Minister’s Staff.” Government of the Republic of Armenia, OGP Armenia Action Plan 2018-2020, Armenian version, https://www.opengovpartnership.org/wp-content/uploads/2018/12/Armenia_Action-Plan_2018-2020_ARM.doc.
[25] In Armenian version: “Development of the software for the beneficial ownership registry (including development of ToR, discussions with CSOs and approval). The registry will be accessible to the public and provide accessible search capabilities.” Government of the Republic of Armenia, OGP Armenia Action Plan 2018-2020, Armenian version, https://www.opengovpartnership.org/wp-content/uploads/2018/12/Armenia_Action-Plan_2018-2020_ARM.doc.
[26] RA Law on Public Service, 23 March 2018, article 31, https://www.arlis.am/DocumentView.aspx?DocID=120832.
[27] RA Law on Combating Money Laundering and Terrorism Financing, 26 May 2008, https://www.arlis.am/DocumentView.aspx?DocID=126311.
[28] “Announcements on the Absence of Conflict of Interest and on Real Shareholder of the Participant,” RA Ministry of Finance Procurement System of the Republic of Armenia, http://procurement.am/en/page/announcements_on_real_shareholder_of_the_participant/; and Armenian Electronic Procurement System, Bids, https://armeps.am/ppcm/public/bid-report.
[29] “Regulations to Reveal Beneficial Ownership of Armenia's Mining Companies Were Discussed,” Hetq.am, 31 January 2019, https://hetq.am/en/article/100469; and “The Legal Regulation of Beneficiary Owners’ Identification Was Discussed,” Ministry of Justice press release, 31 January 2019, http://moj.am/article/2240.
[30] “The EITI Standard 2016, 2.5 Beneficial Ownership,” Extractive Industries Transparency Initiative, https://eiti.org/document/standard#r2-5.
[31] “Beneficial Ownership Disclosure Roadmap of the Republic of Armenia,” Extractive Industry Transparency Initiative, January 2018, https://eiti.org/sites/default/files/documents/bo_roadmap_draft_en.pdf.
[32] Mariam Zadoyan and Syuzanna Soghomonyan (Anticorruption Coalition of Armenia), interview by IRM researcher, 22 February 2019; and Shushan Doydoyan (Freedom of Information Center of Armenia), phone interview by IRM researcher, 28 February 2019.
[33] Sona Ayvazyan (Transparency International Anticorruption Center), interview by IRM researcher, 1 March 2019.
[34] Armenia Extractive Industries Transparency Initiative, https://eiti.org/armenia.
[35] See, for example, Bradley Jardine and Grigor Atanesian, “Mining Dispute Threatens Armenia’s Post-revolutionary Political Consensus,” Eurasianet, 24 July 2018, https://eurasianet.org/mining-dispute-threatens-armenias-post-revolutionary-political-consensus.
[36] Kristine Aghalaryan (Hetq Investigative Journalists NGO), phone interview by IRM researcher, 11 March 2019.
[37] Varuzhan Hoktanyan (Transparency International Anticorruption Center), interview by IRM researcher, 13 February 2019.
[38] See, for example, Financial Action Task Force, FATF Guidance on Transparency and Beneficial Ownership, October 2014, http://www.fatf-gafi.org/media/fatf/documents/reports/Guidance-transparency-beneficial-ownership.pdf.
[39] “Establish Robust Registers of Beneficial Ownership,” Open Government Partnership, https://www.opengovpartnership.org/theme/beneficial-ownership/establish-robust-registers-of-beneficial-ownership.
[40] For example, disclosure of beneficiary ownership of media was included in the commitment proposed by Transparency International Anticorruption Center.

Commitments

  1. Open Data in Official Declarations

    AM0035, 2018, Asset Disclosure

  2. Government Grant Transparency

    AM0036, 2018, Fiscal Transparency

  3. Beneficial Ownership Register

    AM0037, 2018, Anti-Corruption Institutions

  4. Modernization of Community Website

    AM0038, 2018, E-Government

  5. State Water Cadastre

    AM0039, 2018, E-Government

  6. Land Cadastre

    AM0040, 2018, E-Government

  7. Integrated Social Services

    AM0041, 2018, E-Government

  8. Unified Information System for Management of Education

    AM0042, 2018, Capacity Building

  9. Exploring Medical Assistance Program

    AM0043, 2018, E-Government

  10. Platform for Submitting Petitions

    AM0044, 2018, E-Government

  11. Public Service Dashboard

    AM0045, 2018, E-Government

  12. State Travel Transparency

    AM0027, 2016, E-Government

  13. Accountability for Grants of the Government

    AM0028, 2016, E-Government

  14. Transparency of the State Budget

    AM0029, 2016, Fiscal Transparency

  15. "Open Data" in Official Declaration:

    AM0030, 2016, Anti-Corruption Institutions

  16. Portal for Community Decisions.

    AM0031, 2016, Capacity Building

  17. Accountability Licensing

    AM0032, 2016, Capacity Building

  18. Accessibility of Integrated Social Services

    AM0033, 2016, E-Government

  19. "One-Stop-Shop" Pilot Project Within Military Registration Offices

    AM0034, 2016, Capacity Building

  20. Digitization and publication of data in the “Republican Geological Fund” SNCO

    AM0016, 2014, Extractive Industries

  21. Ensuring Transparency in Mining

    AM0017, 2014, Extractive Industries

  22. Ensuring Public Awareness About Health Care Financing

    AM0018, 2014, E-Government

  23. Ensuring Transparency of Asset and Income Declarations of the RA High-Ranking Officials

    AM0019, 2014, Asset Disclosure

  24. Online Broadcasting of the State Procurement Appeals Board Sessions

    AM0020, 2014, E-Government

  25. Community Microsurvey Introduction in 10 Communities

    AM0021, 2014, E-Government

  26. Ensuring Open, Transparent, Participatory and Accountable Process of State Policies and Legislative Reforms

    AM0022, 2014, E-Government

  27. Public Awareness on the Lawmaking Activity of State Governance Bodies

    AM0023, 2014, E-Government

  28. Ensuring Transparency of the Election of Governing Boards of the RA General Secondary Education Institutions and of the Annual Budget Planning and Expenses of Ra General Secondary Education Institutions

    AM0024, 2014, Education

  29. Knowledge and Capacity Building of Public Servants in the Freedom of Information and Anticorruption Field

    AM0025, 2014, Capacity Building

  30. Ensuring Transparency of Local Self Government Bodies of Large Communities

    AM0026, 2014, E-Government

  31. Reviewing the Regulatory Normative Legal Acts (Regulatory Guillotine Project)

    AM0001, 2012, Legislation & Regulation

  32. Improving Internal Audit System for the Public Sector

    AM0002, 2012, Audits and Controls

  33. Improving Procurement Procedures

    AM0003, 2012, Capacity Building

  34. Improving Budget Planning and Reporting Systems Through Full Utilization of Program Budgeting

    AM0004, 2012, Audits and Controls

  35. Promoting Transparency and Objectiveness in Tax Administration

    AM0005, 2012, Conflicts of Interest

  36. Fight Against Corruption

    AM0006, 2012, Anti-Corruption Institutions

  37. Introduction of a Unified Payment System (Portal)

    AM0007, 2012, E-Government

  38. State Car Inspection Improvements

    AM0008, 2012, Infrastructure & Transport

  39. Implementation of an Electronic System for Consular Services

    AM0009, 2012, Citizenship and Immigration

  40. Implementation of Mail-Armenia System

    AM0010, 2012, Citizenship and Immigration

  41. Introduction of e-Statistics System

    AM0011, 2012, E-Government

  42. Introduction of e-Documentation Sharing System in Urban Communities

    AM0012, 2012, E-Government

  43. Ensuring Transparency of Asset Declarations

    AM0013, 2012, Asset Disclosure

  44. Standardization of Offical Websites Content

    AM0014, 2012, E-Government

  45. Improvement of Knowledge and Skills of Public Servants on Access to Information

    AM0015, 2012, Capacity Building