Effective consultation processes for beneficial ownership transparency reform

  • Publication date: 20 June 2020

Legal

Once a commitment to beneficial ownership disclosure has been made and the policy goals are clearly understood, most jurisdictions will need some form of legislation to mandate the disclosure on those entities in the scope of the reform. This will often include both new obligations on entities disclosing as well as sanctions imposed for non-compliance.

Ensuring beneficial ownership data is disclosed well relies on having effective, well-drafted legislation in place that enables beneficial ownership data to be collected and published and used to meet the policy goals of reform. At this stage of the process, many questions asked in the ‘Consider’ stage of consultation will be answered and decisions will be taken about what disclosure will look like and who it will impact.

There should be a formal, time-bound period of public consultation to allow stakeholders to review and comment on the draft legislation or regulation that has been developed. At this stage, there is a risk that broad-based public consultation will be reduced in favour of more targeted consultation focussed on people or groups who can most easily engage with the technicalities of beneficial ownership disclosure’s legal drafting. Although it is important to ensure expert voices with legal and business expertise are able to input at this stage, it is also critical to ensure that civil society expertise and wider public consultation continue.

In addition to shaping reform to better meet the needs of users, engaging civil society and the wider public at this stage puts in place foundations for monitoring and follow-up consultation after the initial implementation. Delivering formal consultation effectively requires appropriate resources beyond the initial implementation phase This is particularly important for a comparatively new reform like beneficial ownership transparency; as good practice and international standards are evolving quickly, the initial implementation will need to be revisited, iterated and improved over time. Calibrating the initial implementation to stakeholder needs as accurately as possible will make this subsequent work easier and more cost effective.

Communicating about the potentially complex elements of legislation for beneficial ownership reform can be challenging. Explaining choices about disclosure thresholds, which entities are required to declare and for which persons’ information is required, can be daunting. However, tools such as corporate ownership diagrams and models of final data disclosure under different policy choices can help engage stakeholders in this process. For example, diagrams like the one shown in Fig. 1 can be used to facilitate discussion about what information would need to be disclosed for companies with different ownership structures:

Figure 1: Illustrative diagram to help communicate how a beneficial ownership structure might be represented in data
Illustrative diagram to help communicate how a beneficial ownership structure might be represented in data

Diagrams like this, which use the Beneficial Ownership Visualisation System (BOVS), are a really useful way to show how different choices in beneficial reform will effect the data finally produced and how useful it may be for different use cases. In this example disclosure framework ‘Person A’ is the beneficial owner and has an obligation to report that to ‘Entity B’, which is the declaring entity.

Maintaining stakeholder engagement with the reforms at this stage is critical to managing the expectations about what final disclosure will look like. As decisions are made about the scope and detail of disclosure, it is unlikely that every interested group will get everything they wish for from the reform. Maintaining broad engagement at this stage will help manage expectations and create a constructive community to engage in the long term as reforms are further developed through secondary legislation or regulation and system design.

When secondary legislation is being drafted, clear decisions will need to be made on the trade-off between getting the right depth of information from disclosing entities and ensuring that the process of disclosure is as straightforward for disclosing entities as possible. During this stage, it is important to consult with stakeholders who will need to use the data to achieve the policy goals of disclosure.

Decisions that may appear to legal drafters as minor administrative concerns may have a significant impact on the fields of data collected and published, and the format in which data is made available to users. For example, specifying a requirement to publish identifying information for companies, such as company number, significantly improves the ability of users to analyse the published data alongside other datasets. Details such as these are critical to creating impactful use of beneficial ownership data.

In addition to consulting on the content of draft legal reforms, it is during this stage that a detailed plan for the subsequent stages of implementation should be developed. Consulting with stakeholders to create a clear roadmap for reform that outlines actions, responsible agents and resources available to support implementation will help stakeholders understand what will happen next and manage expectations about timescale. Agreeing a clear roadmap also sets in place foundations for stakeholders to monitor progress and continue to support implementation.

Regular publishing

It is important that policymakers are open and transparent about what can and cannot be achieved in the reform. Implementing departments or agencies and other parts of government involved should inform and educate all stakeholders about the boundaries of their powers. Publishing regular updates via blogs or social media, releasing policy papers and explanatory notes will support groups to understand the drivers for reform and any constraints governments face. Aim to produce different types of communication with well-designed content that presents the choices to be made in language and a level of detail different audiences can understand.

Likely audiences

Aim to reach:

  • Civil society
  • Businesses/business groups most impacted by reform
  • Academia
  • Law profession
  • Professional service providers

Conventional written consultation (online or offline)

Respondents are asked to give their view on a range of specific questions about the nature of the proposed commitment. The use of diagrams and visual tools for communication is important here to explain the choices to be made.

Beneficial ownership reform often takes place in contexts where more powerful actors wish to shape disclosure to meet their needs. Given this, it can be useful to allow submissions to be made separately by each party, with responses published after the submission deadline to retain transparency.

Likely audiences

This approach is likely to engage those groups already aware of the issues and with the expertise to input into consultation on legislation:

  • Civil society
  • Businesses/business groups most impacted by reform
  • Academia
  • Legal sector
  • Professional service providers

Utilise existing multi-stakeholder fora

Use these fora to ensure the widest range of people and groups understand the choices to be made.

Likely audiences

This approach is likely to engage those groups already aware of the issues around beneficial ownership. Where existing multi-stakeholder groups exist, these should be considered opportunities for engagement. These might include:

  • Chambers of Commerce or other groups of business
  • OGP Civil Society networks
  • EITI Multi-stakeholder Groups
  • Anti-Money Laundering and anti-tax evasion fora

Key outcomes of the ‘legal’ stage

  1. Decisions made on key parameters and aspects of reform, informed by stakeholder responses and reflected in draft primary and/or secondary legislation
  2. Stakeholders are aware of the scope and limitations of reform
  3. A roadmap for implementation of reform is agreed and published

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