7 April 2021 –
In a three-part series of issue-specific briefings for delegations negotiating the UNGASS Political Declaration, the UNCAC Coalition hosted a webinar on Beneficial Ownership Transparency (BOT) alongside Open Ownership and Transparency International. The event was co-sponsored by the Governments of Mexico and the United Kingdom, with participation from over 30 delegates.
The session informed delegates about the importance of targeted and focused language on beneficial ownership transparency for inclusion in the political declaration. Among the many benefits of public and open registries, anti-corruption efforts stand to benefit from clear and accessible data which sheds light on criminally-owned funds and the individuals or entities behind them. As illicit enrichment is increasingly transnational in nature with multiple jurisdictions involved in a single case, the need for global use of beneficial ownership registries is greater than ever before. Particularly in the wake of the Covid-19 crisis, BOT and free access to the information contained in registries by journalists, the media and civil society are key to building back our economies, post-pandemic.
Michael Petkov from the International Anti-Corruption Coordination Centre at the National Crime Agency of the United Kingdom shared his perspective as a law enforcement official. Drawing on his experience in supporting major corruption investigation cases where public beneficial ownership registers were not available, he emphasized that their existence could have contributed to greater efficiency in the investigations and inquiries conducted, as well as facilitated the recovery of assets. Moreover, although law enforcement authorities have considerable powers to prosecute, they are still predominantly bureaucratic bodies and the contributions of civil society and investigative journalism in fighting corruption are critical.
Maira Martini, Policy Expert at Transparency International pointed to weaknesses in current beneficial ownership standards. Although international bodies like the Financial Action Task Force (FATF) have produced recommendations for transparency and beneficial ownership, criminals are still able to hide behind complex legal structures and skillfully evade justice. Furthermore, the flexibility currently allowed for in BOT standards is problematic, with a country ultimately deciding which standards it adheres to.
Data and information can be collected (i) by obliged entities such as financial institutions, banks, accounting or legal firms (ii) by companies themselves or (iii) in the form of open registries. With the majority of countries relying heavily on obliged entities (which are not required to report any discrepancies found), information is only gathered when due diligence is exercised, leading to insufficient data being available and significant delays when law enforcement or other bodies seek access.
Transparency International has launched a petition calling on the UNGASS to commit to transparency in company ownership for the common good. More than 700 signatories from over 120 countries are demonstrating their support for putting an end to the abuse of anonymous companies, and urging all countries to set up central public registers of beneficial ownership.
Thom Townsend, Executive Director of Open Ownership, identified the UNGASS as a unique opportunity to support global efforts in ensuring that governments have the necessary information at their disposal to make informed and quick decisions. The UNGASS needs to capitalize on the momentum built over the past five years, with over 100 countries worldwide committing to some form of BOT. Throughout Covid-19 times, an extra focus on procurement corruption has been a direct result of limited information about whom business is being conducted with, but governments are also taking steps to address this.
Open Ownership has been working on a project to collect beneficial ownership data and link it with procurement in Indonesia, Mexico and South Africa. The UK’s Public Procurement Green Paper will require all foreign companies bidding on UK contracts to disclose their beneficial ownership, and the new US Corporate Transparency Act, indicates that federal contracts above USD 500,000 will be required to disclose the beneficial ownership of contract awardees.
When asked about best practices and the added value of beneficial ownership transparency and public registries, several common threads emerged: verifying information is crucial, and if this involves more scrutiny by journalists and civil society, then they should be recognized as relevant stakeholders in accessing BO data. Even minor disincentives to fraudulent activity – such as requiring any form of identification from individuals submitting beneficial ownership information for a legal entity – can add a layer of authenticity to a registry. Moreover, a general environment of transparency is requisite for a registry to thrive. The speakers jointly identified the fundamental requirements for setting up a public registry:
- The existence of an established definition of what a beneficial owner is, with attention to the scope of the definition;
- The data of ownership, including on the form of how control is exercised, should be presented in a clear and machine-readable manner;
- The ability to disambiguate data by including as much information as possible to uniquely identify each natural person/individual;
- The availability of structured data in a user-friendly format, making it easy to search through;
- Accurate and timely data, which is properly identified, verified and recorded, and kept up to date;
- The creation of sanctions for non-compliance, including for the falsification of information.
The UNGASS’ political declaration should embrace centralized, public beneficial ownership registries as a global standard, emphasizing that there is no space for anonymous companies – highly detrimental to economic recovery – in the international financial framework. This must be supplemented by efforts to verify the information collected, strengthening the accuracy and reliability of beneficial ownership data. Transparency in company ownership is more than a technical solution to a problem: it is a matter of social justice.
Resources for further reading:
- UNCAC Coalition Briefing Note on Beneficial Ownership Transparency
- The Beneficial Ownership Leadership Group, convened by Open Ownership and Open Government Partnership
- Principles for Effective Beneficial Ownership Disclosure, Open Ownership
- Verification of Beneficial Ownership Data, Open Ownership
- Beneficial ownership in law: Definitions and Thresholds, Policy Briefing, October 2020, Open Ownership
- Transparency International, UNGASS 2021: Commit to Transparency in Company Ownership for the Common Good
- Anti-Corruption Initiatives: Beneficial Ownership, Open Government Partnership Global Report