At the start of December 2018, Open Ownership was in Kiev starting our technical assistance to the Government of Ukraine. In October, the country publicly committed to become the first country to implement the Beneficial Ownership Data Standard (BODS), working with Open Ownership through our Pilot Program.
At the opening event, Deputy First Minister Olena Sukmanova highlighted the importance of beneficial ownership transparency to overall anti-corruption reforms in Ukraine, declaring that “these reforms are revolutionary . . . nothing will stop us any more.”
This partnership is a landmark for Open Ownership’s vision of useful and usable beneficial ownership data. It is the first time the Standard will be implemented. By using the Standard, it will be far easier to link Ukraine’s data internationally through the Open Ownership Register, making it comparable and useful for people around the world. Through the process, we will have many opportunities to learn that will help us when it comes to supporting other countries in this area.
The work builds on Open Ownership’s review and recommendations for improving beneficial ownership transparency in the country, developed after we spent time scoping out the opportunity at the start of the year, and we were thrilled to get into the technical and policy details that will make it happen!
Ukraine became the second country in the world after the United Kingdom to implement a public register of the beneficial owners of corporate entities registered in country. Laws were passed in 2014 and 2015, and work has been underway ever since.
Throughout the week, Open Ownership’s tech and policy experts met with Ministry of Justice officials, the technical team responsible for Ukraine’s beneficial ownership register, and users of the data including the Financial Intelligence Unit and civil society organisations.
We spent two days with the technical staff who are developing the new software system that will allow Ukraine to store and publish beneficial ownership declarations as structured data. Working through their database field by field, we mapped the data points they plan to collect to those required in BODS. From this we were able to identify which aspects need to change to improve the accuracy and usability of the beneficial ownership information it publishes. Authentication, authorisation, and validation improves the data quality and makes it more useful for the government, international bodies, the private sector, and civil society actors to use when addressing issues of corruption.
Some technical improvements are required. This includes modifying the database so that when a beneficial owner is entered so it checks whether the individual is already listed and links their records. This would improve functionality by enabling the register to show all companies of which a person was a beneficial owner, and enable a history profile to be built up.
We found that transliteration could be a problem (for example when information is changed from Cyrillic to Latin characters). At the moment this introduces significant errors in beneficial ownership registers and makes it harder to link information transnationally. In the future we will be sharing guidance on how to address this issue.
Other changes are much broader in scope, and may require amendments to the law to authorise Ukraine to collect the more granular data required by the Standard. One notable example is the type of ownership held by a beneficial owner over a legal entity. Currently, Ukraine’s definition of beneficial ownership specifies some mechanisms through which beneficial ownership can be held, including voting rights and holding shares. However the definition is not comprehensive and the software system does not capture this information as structured and machine readable data. Understanding the type of beneficial ownership held by an individual can be important and useful. For example, law enforcement investigating suspicious activity may want to understand what rights an individual has over a particular company.
As well as identifying areas for improvement, we found several ways in which Ukraine’s new software will enable much more useful beneficial ownership data to be published.The system is set to collect exact percentage of ownership (above the 25% threshold for beneficial ownership specified in law) - provided this is published publicly as open data. This will be an improvement on, for example, the UK’s beneficial ownership register, which only collects and publishes percentage ownership in bands (eg. 25-50%). These positive highlights are noted and taken forward as recommendations for our work in other jurisdictions.
The week ended with an official opening of the project by the Deputy First Minister and Deputy Minister for State Registration, followed by a day discussing the legal framework for beneficial ownership transparency and the broader changes to Ukraine’s regime that are required to make beneficial ownership data genuinely useful. Improving compliance was a key theme - both by improving positive incentives for companies to submit their information, and by strengthening sanctions for those that fail to submit, or submit incorrect information.
So what’s next?
We’ll be supporting Ukraine to implement the changes - both technical and policy - that we identified, and are working towards the first exports of Ukrainian data in BODS format by February 2019. We’ll be making sure we learn everything we can from our work with Ukraine, and include it in information we publish to guide other countries implementing beneficial ownership regimes.
It’s clear that implementing the Beneficial Ownership Data Standard will bring real benefits to Ukraine’s beneficial ownership regime, and help drive improvements in other countries - we’re looking forward to continuing to work with our partners in Ukraine!
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