Guide to implementing beneficial ownership transparency

Commit to create a beneficial ownership register

Implementation begins with making a specific, public commitment to creating a BO register and beginning to draw up initial plans as to how this may be achieved. At this stage, it is important to consider how to: identify which agencies will be involved in and leading implementation; outline programmes for involving stakeholders and data users in policy design; and decide how to sequence reforms and introduce future improvements.

Committing to beneficial ownership transparency

More countries around the world are making commitments to BOT, including through Open Government Partnership (OGP) National Action Plans; meeting the BO requirement in the Extractive Industries Transparency Initiative (EITI) Standard; complying with emergency lending requirements of the International Monetary Fund (IMF); and, in Europe, through the implementation of EU Anti-Money Laundering Directives.

An effective public commitment to BOT should:

  • be ambitious, specific, and achievable;
  • articulate the policy objectives and the intended benefits for the country;
  • be mutually reinforcing with relevant international standards, such as the EITI Standard and the OO Principles;
  • build on the current context (for example, if a non-public register already exists, commit to making it publicly available as open data);
  • identify the agencies that will be involved in implementation, and name a lead agency;
  • be developed in participation with relevant stakeholders, including data users and policy makers.

Operationalising the commitment

Before embarking on the detailed technical and legal reforms to realise the above commitments and create a public register, there are a number of general points to consider. These include:

1. Sequencing the introduction of disclosure requirements

Whilst the ultimate aim of BO legislation should ideally be to achieve the OO Principle of the comprehensive coverage of all relevant legal entities and natural persons, different countries have adopted various approaches to introducing requirements for companies to disclose their BO information. One approach adopted, for instance in Ukraine and the UK, is to introduce requirements on companies operating across the whole economy, simultaneously. The disclosure of BO data of all legal entities in a given jurisdiction has the most utility for the widest range of policy applications. The alternative is to stagger implementation by focusing first on one sector and then expanding disclosure requirements to cover other parts of the economy (an approach used in Armenia and Nigeria, for example). This second option tends to be preferred in contexts where a staggered introduction enables implementers to leverage the political will for pro-transparency reform in an area of economic activity associated with higher corruption risk. Jurisdictions with millions of registered companies may, for example, initially opt to implement a single-sector disclosure regime (e.g. for the extractive industries or firms involved in public procurement) as a pilot programme that will test their systems and business processes prior to an economy-wide rollout.

Resources

When considering how to set the scope of disclosure requirements to meet priority policy goals, it is worth examining the impacts of registers for different sectors of the economy. OO has produced policy briefings on the benefits of centralised economy-wide public registers, as well as specific use cases, such as the role BO data can play in improving procurement processes and the issues countries need to consider during implementation.

2. Identifying a lead agency to oversee implementation

Creating and publishing BO information according to the OO Principle of a central register usually involves a number of different government agencies, including the finance, justice, and interior ministries, along with the registrar of companies, and others. This can lead to competing, overlapping, and conflicting mandates and areas of responsibility, unless carefully managed. To navigate around the challenge of overlapping functions, responsibilities, and inter-agency coordination, it is good practice to assign overall responsibility for coordination and delivery of implementation to a lead institution. Selecting the most appropriate institution for this will depend on the particular composition of agencies within a jurisdiction, as well as the specific policy aims countries wish to achieve with BOT reforms. Generally, jurisdictions seek to publish BO data for a mixture of policy goals, but in broad terms, where countries have sought to create BO registers as a means of clamping down on tax evasion, they have placed the register within the remit of tax authorities. Where business transparency and investment promotion is the main aim, a company registry agency or the finance/economy ministry may be more suitable. On the other hand, for countries that are mainly interested in improving anti-money laundering (AML) approaches and tackling corruption risks, then responsibility for BO reform may be assigned to justice or interior ministries, or a Financial Intelligence Unit (FIU). Other considerations that may influence this decision include an assessment of which agency has sufficient digital expertise and knowledge of business process reform, budgets, and/or domestic political influence to oversee a successful reform process. Whichever agency is appointed to lead the reforms, other relevant departments should be consulted and involved to help ensure that the legal framework responds to the various policy and data needs across different parts of government.

3. Consultation on beneficial ownership reforms

It is not only the legal framework that can benefit from broad consultation; each stage of reforms outlined in this implementation guide should involve as many relevant stakeholders and potential user groups as possible, including government officials, citizens, and businesses. Implemented effectively, streamlined data and information will help government officials, entrepreneurs, civil society, academics, and law enforcement more easily achieve their different goals by responding to their user needs. However, getting key details wrong can increase bureaucracy, limit impact, and increase costs. Consultation with stakeholder groups throughout the implementation process is an important part of any BOT journey. Without these consultations, the system of collection and publication may not work well among impacted people and groups. At the same time, highlighting the wider market efficiency and due diligence advantages of BO reform for all businesses can expand the types of stakeholders that are consulted. As reform takes place, this can also help to create the foundations for well used data that can deliver sustainable impact.

Resources

OO has outlined consultation methodologies and audiences for all steps of this implementation guide in a working paper on effective consultation processes for BOT. This resource outlines a range of comprehensive techniques for consulting at each stage of implementation.

4. Financing the register

Some disclosure regimes have opted to charge for register access in order to recoup implementation and running costs. A number of studies have highlighted the potential economic value of BO data (see text box). This value is dependent on data reuse, and fees are a barrier to this. Restricting access through the imposition of a paywall reduces the potential benefits by limiting the number of users consulting the data. It also adds to the technical complexity of implementation (for example, due to the need to create secure payment handling mechanisms).

The economic value of beneficial ownership data in the UK

In the UK, a 2019 Companies House (CH) study estimates the value of UK company data to be an average of GBP 1,100 per reuser, with an estimated total benefit between GBP 1 billion and GBP 3 billion per year – of which BO data constituted between GBP 40 million and GBP 120 million – for Companies House Service (CHS) users alone. The study explains that “more than half of the smaller intermediaries that access CH bulk data products have only been accessing these products since they became available free of charge. This suggests that access to free data has stimulated the development of new business opportunities”.

Resources

A broader discussion of the costs of establishing and maintaining BO registers, and the benefits they can bring, is included in the OO policy briefing on making central BO registers public.

Next page: Legal aspects of creating a register