Beneficial ownership transparency implementation: Lessons from five countries
Chinwe Ekene Ezeigbo was a Policy and Research Consultant for Open Ownership from January to April 2021. Following an international career focused on resource governance, she is currently finalising a PhD at the University of Queensland’s Sustainable Minerals Institute’s Centre for Social Responsibility in Mining.
I have been working with Open Ownership (OO) to review the implementation of beneficial ownership disclosure regimes and their impact in five different countries, four of which are part of the Beneficial Ownership Leadership Group (BOLG): Armenia, Kenya, Nigeria, and the UK. Though not a part of the leadership group, the fifth country, Ukraine, was an early adopter of beneficial ownership transparency (BOT). BOT implementation is at different stages in these countries, and our research has uncovered key lessons which provide some guidance for countries facing challenges with aspects of implementing beneficial ownership disclosure regimes.
Three key lessons
1. Political will might not be enough
Critical to the implementation of beneficial ownership disclosure is the political will and commitment for reforms. Political will is at its most effective when BOT fits into a country’s national agenda. As such, whilst global commitments and obligations may provide an impetus, unless BOT fits into the national agenda it will be difficult to realise. I found that in Armenia, Nigeria, and Ukraine, there was more progress with BOT reforms because it fit within the existing anti-corruption agenda. As a result, these countries have taken steps to enact new legislation or review existing legislation to accommodate BOT. The challenge, however, is that political will may not be constant. In Kenya, for instance, BOT implementation appears to be stalled, presumably because of the government’s waning or diverted interest.
2. The requirements for beneficial ownership transparency regimes are ambitious, especially for developing countries
BOT is ambitious and implementation may not be straightforward or simple. Different contexts present different challenges. For instance, one key principle guiding the BOLG is that beneficial ownership data should be freely downloadable, searchable, and reusable by the public. This requirement is ambitious for two reasons. Firstly, potential negative consequences of reduced privacy should be considered. Kenya, for instance, currently opts for a non-public beneficial ownership register, mainly because of concerns around data privacy. Most developing countries still battle with inadequate data protection which provides a framework for processing and publishing personal data.
Secondly, there is a cost to developing and maintaining a free and open beneficial ownership register. For developing countries with budget constraints, developing a beneficial ownership register that is free and accessible might be more tasking. In Nigeria, for instance, international donors have committed to enabling the development of a beneficial ownership register for the Nigerian economy. However, with donor funding, ensuring sustainability is difficult. The issue of financial constraints is hardly discussed, and there is, as yet, no comprehensive literature addressing how much implementing beneficial ownership registers would cost in developing countries, or what sustainable funding models could look like.
3. The devil is in the details
Beneficial Ownership data quality affects its utility (as with the “garbage in, garbage out”(GIGO) rule in computer science). I found that there is an increasing use of beneficial ownership data by investigative agencies and civic organisations to fight financial crimes, improve public procurement and improve business transparency in Ukraine and the UK. Whilst the data within the registers has been somewhat useful for the required purposes, more work needs to be done to maximise the utility and potential benefits of the data. The OO Principles provide a useful framework for this. There is much written about the need for the verification of data, and many countries have expressed this as their greatest challenge.
Nigeria was more focused on finalising the first iteration of the beneficial ownership register to meet global commitments to the Extractive Industries Transparency Initiative (EITI), with plans to work on subsequent iterations of the register to meet international standards. This approach seems to be a logical strategy for getting started. Delays in implementing subsequent iterations of the beneficial ownership register to ensure the data is most useful might stall the fight against global financial crimes. This may be why, unlike in Ukraine and the UK, there was no apparent impact from the use of beneficial ownership disclosure data yet in Nigeria.
Final thoughts
The utility of publicly available beneficial ownership data for preventing corruption is not a mirage.However, there appears to be a need for more civic awareness of BOT. beneficial ownership is a relatively new topic, and it appears civic engagement is growing. However, I feel more noise needs to be made by civil society about the usefulness of beneficial ownership data to call for more action on BOT globally. More understanding of how to use beneficial ownership data is key. Organisations such as OO can provide technical assistance and capacity building to countries and organisations that require the tools to push for reforms. The implementation of BOT globally will be feasible if the issues discussed are addressed by implementing countries. There is indeed hope for the use of beneficial ownership data in fighting corruption, but more work left to be done.