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Where Do We Go From Here? Taking Stock of Beneficial Ownership Transparency

Siguientes pasos para la transparencia en los beneficiarios reales

A few weeks ago, the Government of Georgia hosted the Fifth Open Government Partnership Global Summit in Tbilisi. The event provided an opportunity for leaders from more than 78 participating countries, 20 local governments and a wide range of stakeholders to exchange ideas on how they are making governments more transparent, accountable, and responsive to citizens.

At the summit, The B Team and the Natural Resource Governance Institute co-hosted a session that looked at what’s next in beneficial ownership, unpacking current efforts to push for a global norm around beneficial ownership transparency and exploring what a next generation of commitments around the subject in OGP Action Plans might look like. We heard views on this from government, civil society, business and experts. Here are some takeaways.

There is real buy-in and momentum on beneficial ownership transparency

Public disclosure of beneficial ownership is now the direction of travel in many countries. Increasingly, policy-makers understand the benefits of being able to “follow the money” across borders through beneficial ownership registers. Beneficial ownership transparency implementers expect to see a variety of benefits to society, governance, and markets. Speaking on the panel, Yunus Husein, who chaired the committee that drafted the presidential decree on beneficial ownership transparency in Indonesia, indicated that his government saw an opportunity with BOT to stem illicit financial flows.

Policymakers aren’t the only ones seeing the benefits of the global push. James Swenson of Thomson Reuters talked about the benefits beneficial ownership transparency will have on the ease of doing business. Public, central registers of beneficial ownership offer a critical opportunity as a primary source of information for businesses doing due diligence. This is, of course, dependent on how useful and trustworthy the information is, and to what extent the institution administering it can be trusted.

Civil society, too, views beneficial ownership transparency as a means to greater government and corporate accountability. Public registers would enable activists, journalists and academics to follow the money trail and match companies and owners to government contracts and government officials, for instance. Activists realize its potential to reduce conflicts of interest in the interface of government and business dealings. David Ugolor, who advocates for beneficial ownership transparency in Nigeria and participated in the session, spoke about a planned register in Nigeria as a key anticorruption tool. Ugolor indicated its main opponents were in Parliament — elected officials who were concerned about what it might expose.

Countries are ready and willing to share experiences in implementation – including the devil in the detail

The central challenge of beneficial ownership transparency is generating useful, reliable data. This has a number of technical and political aspects. The benefits expected by policy-makers will come about only if the data is high-quality and reliable enough to be employed by key user groups, including law enforcement, civil society, and business. OpenOwnership is developing technical assistance materials and trainings for implementers premised on the need for these people to involve these user groups early and often and to make stronger connections between technology and policy.

A few early considerations for implementers include:

  • Store historical data. This could prove critical in stopping bad actors from hiding their identity by simply changing the name of their company or swapping themselves out for nominees.
  • Minimize loopholes. Draft solid definitions of beneficial ownership, set low ownership thresholds and ensure there are reliable identifiers for both companies and people.
  • Design methods for validation and verification. Are individuals submitting data authorized to do so? Do data collection methods reduce the risk of errors and mistakes? Are there methodologies for raising red flags that submitted data may contain deliberate inaccuracies?

Importantly, the more people can use the data (and report back on it to the authority responsible for maintaining it), the more likely it is to be reliable. Companies House in the U.K. has indicated that exponentially more users access their data now that it publishes beneficial ownership information. The organization has received thousands of indications of missing or inaccurate information, which is being investigated.

Implementers may face resistance from some companies that fall under new beneficial ownership rules. In particular, one argument is that disclosure would run afoul of the law due to privacy restrictions. For example, a company could claim that provisions in national privacy laws or confidentiality clauses in contracts restrict their ability to disclose. Indeed, beneficial ownership transparency requires a nuanced approach to data protection that ensures data subjects are protected and that users have enough information to adequately distinguish people and companies listed in the beneficial ownership data. Names of people or companies are simply not enough.

Early analysis by OpenOwnership suggests that data protection is not a barrier to establishing public, central registers of beneficial ownership. The U.K. has published beneficial ownership data under an open license in a fully public dataset, despite being subject to stringent EU data regulations. To explore this further, The B Team and OpenOwnership have commissioned research to explore how well-administered, technologically savvy beneficial ownership regimes can walk the line between transparency and data protection. We look forward to findings in late 2018.

OGP offers a practical way to drive the beneficial ownership transparency agenda

The Open Government Partnership made anticorruption a thematic priority in the past year – and considers beneficial ownership transparency a key tool to tackle it. Sixteen countries have already included beneficial ownership commitments in their OGP National Action Plans, with more commitments anticipated in the new round due in 2018.

Commitments to public registers are a big and important first step for governments. But what could come next, both within OGP action plans and beyond?

First, beneficial ownership transparency can be linked to open contracting. For example, in the extractive sector, governments can strengthen their licensing and contracting policies and processes to tackle basic corruption risks posed by problematic beneficial ownership linkages. A beneficial ownership disclosure framework linked to open contracting in the extractive sector could collect information at the time of application or prequalification and use this information to screen and disqualify applications that report false information or present clear corruption risks. In short, decision-makers could scrutinize problematic beneficial ownership structures as part of the decision to make an award. NRGI has developed a template for legal provisions and, jointly with the Open Contracting Partnership, general guidance that countries can use to incorporate beneficial ownership transparency into policies on extractives license and contract allocations.

Implementers can also ensure the requirements of data users are embedded into their beneficial ownership regime early on. They can do this by committing to implementing the Beneficial Ownership Data Standard (BODS). BODS is a conceptual and practical framework for collecting and publishing beneficial ownership data. Importantly, it enables data to be interoperable, links data across borders and helps ensure high quality in the data gathered. BODS, now nearing completion, has been developed in collaboration with dozens of international experts in company data and in technical standard-setting, across civil society, business, and academia.

Finally, OGP can help ensure beneficial ownership transparency efforts don’t fall into national or sector-specific siloes. The need for this is practical. Much of the potential of beneficial ownership transparency is its use and comparability across geographies. In order to encourage learning across governments and other implementers, OGP has partnered with OpenOwnership to establish a peer-learning network of governments that have implemented beneficial ownership regimes or are considering publishing beneficial ownership information in line with open data principles. We’ve named this new initiative the Beneficial Ownership Transparency Network, and we are all excited to work with group of pathfinders who will share experience and help one another achieve success, within the network and beyond.

 

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