The use of beneficial ownership data by private entities

  • Publication date: 31 March 2022
  • Author: Sadaf Lakhani

Implications for policy and practice

As the findings demonstrate, there are multiple use cases for BO data within a range of private sector industries. The biggest driver of BO data use by the private sector is compliance with government regulations. Other drivers include the growth in voluntary standards, evolving industry best practices, and risk management.

However, many companies lack a centralised approach to accessing and maintaining BO data when more than one department uses it. This poses challenges to access, validation, and usability of the data by the different departments, but may be due in part to deficiencies in BO data and the need to rely on multiple sources and third-party data service providers.

For all use cases, BO data is currently falling short of effectively providing the insights that private entities are looking for. Companies using data for compliance face the most pressing challenges, which can prevent them from achieving the regulations’ objectives. Data availability is a key challenge. BO data is not consistently available across jurisdictions, and where it is available, usability is reduced by lack of uniformity, completeness, reliability, or interoperability. These issues are expected to grow, as regulations become more stringent and more expansive across industries. Ensuring that companies subject to regulations that mandate BO data use have access to high quality data will greatly assist with compliance.

To date, efforts by companies to address these challenges rely on significant technical, human, and financial resources. Whilst this may address some issues, the cost of these solutions means they may not be available to all companies. Ultimately, these are imperfect solutions to the issue of “garbage in, garbage out,” and the lack of uniformity and consistency in data sets must be addressed at their origins. That is, data on BO in government registers needs to be accessible, reliable, usable, and up to date.

Governments are best placed to collect, verify, and publish BO data. Whilst BO data providers add genuine value, in many cases their efforts are spent on addressing basic issues that government registers are better placed to address. If governments would do so this would in turn allow BO data providers to add additional value to their services and extend the use of BO data. Put simply, the better the data these companies can ingest, the more they can target human resources at further enriching the data, for example through more complex aspects of open source research. Furthermore, challenges in using BO data currently constrict other businesses from unlocking BO data’s full potential in areas beyond compliance.

Considerations for governments

The research findings indicate that the availability of standardised, reliable BO data from multiple jurisdictions would greatly assist both smaller companies and those with large multinational operations and supply chains to use BO data in an impactful way. Governments should consider the following actions to assist in addressing current challenges and future demand for BO data by private entities:

  • Maintain central, public registers of company ownership that can be accessed easily without restrictions and other hidden technical and cost barriers.
  • Make the data in registers available as open, structured, and machine-readable data. Ideally, this would use a common data standard, such as the Beneficial Ownership Data Standard (BODS),[1] to ensure uniformity and consistency across data sets.
  • Ensure verification of data at the point of and after submission to allow for greater ease of use and greater reliability of data in registers. The reliability of data was identified by the research as an important factor in efforts by private companies to comply with regulations that involve the use of BO data.
  • Data in registers needs to be kept up to date. For a number of use cases, historical data is also important, including for compliance purposes. Governments should require regular confirmation of existing data and timely notification of all changes, and they should keep historical records.

The Open Ownership Principles

The OO Principles[2] provide a framework for governments to implement BO registers in a way that is useful for the private sector, responding to many of the issues raised in this research.[3] The OO Principles, first published in December 2020, are based on OO’s work with over 40 countries establishing good practices for open data, and they are based on the findings from practitioners and academic researchers, as well as consultations in early 2021, which included private sector participants. The nine interrelated principles improve data by focusing on enabling data disclosure and collection, facilitating data availability and accessibility, and improving data quality and reliability.

Considerations for private sector actors

The findings have also identified steps the private sector can take to improve the use of BO data and help governments implement useful registers.

  • Better centralisation and integration of access and use of BO data within an organisation may assist with greater usability of the data by all relevant departments of the company.
  • Businesses, investors, and other private actors can advocate for open data with consistent standards to facilitate ease of access and use by private entities.
  • Obliged entities can collaborate with governments to consider whether the techniques for gathering information and methods for verification that they have developed can be implemented for improving government data verification processes and the maintenance of open registers.
  • Where open registers exist, businesses can contribute to data accuracy by reporting discrepancies.
  • Businesses can use their industry good practice secretariats and other thematic networks to continue to raise these issues with governments and non-governmental regulators.
  • Businesses can explore and document the use of BO data in meeting broader compliance, integrity and sustainability goals, such as ESG standards.
Notes

[1] “Beneficial Ownership Data Standard (v0.2)”, OO, n.d., http://standard.openownership.org/en/0.2.0/

[2] “Principles for Effective Beneficial Ownership Disclosure”, OO.

[3] Ibid.

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