Official comment on Beneficial Ownership Information Access and Safeguards, and Use of FinCEN Identifiers for Entities
2. Structured and interoperable data
As stated in the NPRM, “[i]n designing the [system], FinCEN should survey other beneficial ownership databases to determine their best features and design.” Emerging good practice, as demonstrated by the UK Companies House’s register, shows that the collection, storage and sharing of structured and interoperable data is fundamental to facilitating useful access for authorised users. Useful access should ensure BOI is easy to obtain, interpret and check. In addition, FATF requires access for competent authorities to be rapid and efficient (discussed in more detail below).
Structured data refers to information that is highly organised according to a predefined model. Structuring data creates information that is predictable. Examples of the way structured data can be integrated into both human and machine-led processes to improve the usability of BOI include:
- Obtaining or viewing data through a web interface, application programming interface (API), or in bulk formats;
- Searching and querying BOI based on particular fields or criteria, such as an address;
- Bulk analysis of single or combined data sets, for example to assess data quality;
- Automation of business processes such as cross-checks for data verification;
- The collection of metadata, such as the use of particular company formation agents (collected in the BOI directory) or internal access logs (collected in an access portal created by authorised data users); and
- Converting complex information into user-friendly formats, such as a dashboard.
Structured BO data is also quicker and cheaper to access and use. To illustrate, the cost for law enforcement of accessing and using unstructured information was noted as a significant motivation behind increasing BO transparency in Canada.
At a minimum, structured BOI should:
- Identify the people, companies, and other relevant parties disclosed in a BO declaration by using unique identifiers and sufficient descriptive fields;
- Describe the full range of relationships that can exist between parties disclosed in a BO declaration; and
- Ensure BOI is easy to access, interpret and check.
Data collection forms play a large role in determining the ultimate structure of BOI. FinCEN already proposes to collect beneficial ownership information by webform, which is best practice and allows better onward handling of the data. Design features that help people provide accurate and unambiguous information as structured data include being clear about the format in which answers are expected (for example: “Provide dates in MM/DD/YYYY format”); stating clearly which fields are required and which are optional; and providing selection lists rather than free-text entry where relevant (for example, when asking for the country of registration of non-domestic entities). Webforms also allow for the integration and automation of checks to ensure values are only submitted if they conform to known and expected patterns and that they are real and exist by cross-checking information against authoritative sources in a privacy-enhanced way, at the point where information is submitted, as discussed above.
In a limited number of cases, the use of free text is appropriate and should be incorporated. For example, in a circumstance in which a company seeking to comply with the disclosure requirements has been unable to uncover the information required of them, a required free text field could be used to explain why the person is anonymous or their identity is unknown and to provide more detailed information. Allowing for the submission of declarations saying the reporting entity does not know who its beneficial owners are should not be permitted outside exceptional circumstances. These reporting entities should be required to submit supporting evidence and should be marked as high-risk in the risk-based verification mechanisms discussed above. Furthermore, it is recommended that regulators and persons designing forms work together and consult with agencies and individuals who will be the end users of the data created through the declaration process. Testing the form with a representative sample of reporting companies will assist with further refining of the document to improve usability, clarity and completeness.
Example showing information flows and business processes which can be supported using structured data machine-readable formats. While the BOI directory will not be made available via a “Public website” per the CTA, the options displayed for data use functionalities (for example, per-record search and downloadable bulk data) may be relevant for authorised BOI data users access protocols in the US context. Source: Open Ownership (2022)
Data standards make it easier to realise the full benefits of the increased functionality of structured data because BO data is predictable regardless of its origin, making collaboration and data use in multiple organisations less challenging. A data standard provides a documented set of rules and agreements for how data is structured, published, and contextualised. It can also cover data format, definition, transmission, manipulation, use, and management. Standards provide a common language for producing and understanding data, regardless of its origin, and embed a high degree of interoperability by design. Considering the number of different agencies that may be accessing BOI in the United States, using a common data standard is particularly important to ensure usability. Structured data that does not adhere to the same data standard can be, but is not necessarily, interoperable, but interoperability requires an extra step of translation to join the data together.
The Beneficial Ownership Data Standard (BODS) is a data standard which sets rules for high-quality BO data, and its increased adoption will facilitate the rapid and efficient exchange of information between jurisdictions around the world. BODS has been endorsed by the UK Government’s Open Standards Board to help deliver the government’s commitment to publish beneficial ownership data in a structured, machine-readable format, and for its usefulness in storing, machine-readable BOI to share with other government organisations. It is currently being used by Latvia, Nigeria, and Armenia. Kenya, Liberia, Lithuania and Portugal have all made Open Government Partnership commitments to structure their BOI using BODS. Furthermore, two of the world’s leading company registry software companies are promoting the use of BODS through their registry development services, one of which has put BODS at the centre of the register software they offer to governments. The FACT Coalition has previously urged FinCEN to review and, to the extent feasible, adopt BODS.
A number of tools have already been developed to use and analyse BOI using BODS. For example, in September 2021, Armenia became one of the first countries to publish BOI using BODS by incorporating the standard into the design of its register software. The adoption of the data standard permits new uses of its BO data and enables the country to incorporate different tools developed for BODS directly into its register. For example, Armenia uses the BODS data visualisation library that automatically produces ownership graphs from the data to allow users to easily understand, interpret and analyse company structures (see diagram). From late 2023, Armenia also plans to draw structured BO data from the State Register into its procurement systems (as required by the FATF) as a means of tackling corruption, collusion, and bid rigging during government tender processes.
BODS data is automatically visualised on Armenia’s beneficial ownership data portal. Source: Open Ownership (2022); www.e-register.am.
To learn more, please refer to OO’s policy briefing on Structured and interoperable beneficial ownership data; form design guidance Beneficial ownership declaration forms: Guide for regulators and designers; guidance on Building an auditable record of beneficial ownership; and draft specifications on the Beneficial Ownership Data Standard.