Who benefits? How company ownership data is used to detect and prevent corruption

Conclusion and recommendations

Beneficial ownership has evolved from a concept in tax law to one that is actively applied in a range of policy areas, including anti-corruption. Transparency reforms have enabled information about who ultimately owns and controls companies to be available to a range of anti-corruption actors, including law enforcement; financial investigative units; banks and other businesses; civil society and investigative journalists; and to the public for oversight and accountability.

Beneficial ownership data is already being used effectively to counter corruption in a variety of ways. Ownership information has enabled anti-corruption investigations and has helped reduce corruption risks by informing decision making. Analysing data using novel approaches has delivered insights to inform policy making, research and anti-corruption insights.

Promoting its use more widely and effectively and enabling innovation is the next step in the path towards fully unlocking the potential impact of this area of reform. To make this happen, anti-corruption actors should work together to implement five recommendations, outlined below, that will make a difference in increasing beneficial ownership data use in addressing corruption.

1. Build registers that meet user needs

Around 120 countries have committed to beneficial ownership transparency reforms, but under half of these have implemented and launched registers.[59] Over 50 of these countries are committed through EITI membership. To unlock the full potential of beneficial ownership data to counter corruption, it is necessary to bridge the implementation gap.

The cases presented in this paper illustrate that in order for registers to be most useful, they have to meet the needs of a range of users. Therefore, governments should design registers with the needs of users in mind, and they should consult with potential users throughout implementation.[60] In the process of developing a register, design decisions are taken at every stage – from the primary legal framework through to the data collection forms, level of details, regularity of updates, verification procedures and interface for accessing data. All these decisions affect the usability and usefulness of the data to detect and prevent corruption. An inter-agency and consultative approach is needed to ensure registers work for key user groups, including government agencies, procurement authorities, businesses, civil society and the public.

As there is considerable divergence in implementation, multilaterals and standard-setting bodies should raise minimum standards for available ownership information. This also means potential loopholes to the reforms, including legal arrangements such as trusts, should be closed, and particular attention ought to be paid to disclosures concerning high-risk sectors, such as the extractive industries.[61]

Governments should ensure sufficient data is accessible to all potential data users without undue restrictions and in a format that enables data use, such as by making registers publicly available. Access on a selective basis or against a fee cannot achieve the goal of public oversight and would severely limit data use by a range of anti-corruption actors, including journalists and businesses. While many implementers are rightly taking the time to strike a fair balance between transparency and privacy, they should also consider the variety of established approaches to mitigate the potential negative effects of the publication of data. Businesses can lead by example by publishing information about their own beneficial ownership, as well their partners and suppliers. Collecting, storing and making beneficial ownership information available as structured and interoperable data allows for new types of analysis for both technical and non-technical users by allowing websites, apps and other tools to readily process the data.

2. Raise awareness and capacity for data use

A potential obstacle to scaling up the use of data is a lack of understanding and sensitisation to beneficial ownership transparency. A recent baseline analysis conducted among Opening Extractives programme countries revealed diverging levels of awareness and understanding between different user groups, and broadly a lower understanding among potential users of data than among government agencies tasked with implementing reforms.[62]

Governments and civil society should raise public awareness of beneficial ownership transparency and build the capacity of financial investigative units, law enforcement, businesses and journalists to use data in central registers through the development of resources and guidance as well as through training.

Opening Extractives is supporting data use to reduce corruption [63]

Opening Extractives engages with governments and supports them in developing beneficial ownership transparency reforms, and it also invests in those who will use the data made accessible through these reforms. The programme is currently supporting five projects to encourage data use in participating countries:

  • In Argentina, the civil society organisation Fundeps [64] promotes transparency in the minerals sector, in partnership with Red Ruido, by investigating the ownership and management of lithium extractive companies and carrying out other accountability and advocacy activities.
  • In Mongolia, the Mongolian Data Club [65] trains journalists in using a data platform they created to investigate procurement contracts of state-owned mining companies, and is updating and strengthening the platform to support greater accountability and good governance of natural resources.
  • In Nigeria, Policy Alert, [66] in partnership with Tax Justice Network Africa, is implementing an investigative project looking into the beneficial owners of four oil and gas companies and their involvement in crude oil swap deals. In partnership with a local Nigerian organisation, Directorio Legislativo [67] is also replicating its Joining the Dots platform to enable cross-checking data about the beneficial owners of companies, PEPs and companies holding extractive licenses to generate red flags for corruption.
  • In Zambia, the Centre for Trade, Policy and Development [68] is building on existing beneficial ownership data from the Zambian Patents and Companies Registration Agency and other sources of information to develop an online platform with data on key players in the copper mining sector.

3. Invest in innovation

Along with the private sector, journalists and other civil society actors are leading the way when it comes to experimenting with approaches to connecting beneficial ownership information with other data sources to generate new insights, tools and red-flagging mechanisms that could be used to detect and prevent corruption. For example, the Open Ownership Register allows users to search structured data on over 8 million companies from more than 200 jurisdictions in one place and has supportive tools, such as a data visualiser to help users see connections between individuals and companies. Donors, governments and companies can support organisations, projects and individuals who are using beneficial ownership data to advance innovation in anti-corruption work.

4. Embed the use of data into existing and new processes

Scaling the use of beneficial ownership data means it should be embedded into existing processes, such as the screening of third parties. Businesses should embed the use of beneficial ownership data into existing due diligence and risk-management processes, including in due diligence of suppliers, vendors, distributors and other business partners and human rights assessments. This requires strong company policies on vetting partners, applying established standards for deciding with whom to do business.[69]

It is also critical that governments embed the transparency and use of beneficial ownership information into existing and new policy areas and processes, such as the energy transition. It is already being integrated as a standard for countries and companies in extractive industries and has been a particular focus for fossil fuel extraction. The energy transition will see the emergence of new supply chains and the opening of new mineral markets. Countries that produce the critical materials on which these systems depend, such as copper, lithium and nickel, will likely face similar corruption challenges to those that have been observed in extractive and non-renewable energy industries in the past. Therefore, it is critical that governments should build transparency into the energy transition by adopting and championing beneficial ownership transparency, along with contract and payment transparency. Beneficial ownership information should be disclosed by all companies, including all companies involved in critical mineral and renewable energy supply chains.[70] Adopting transparency measures, in addition to beneficial ownership screening of third parties, will help prevent political elites from capturing unfair opportunities. These reforms should also be extended to climate financing and green energy funds.

5. Build sustainability into reforms

A key concern for many lower income countries is how to fund these reforms and meet the ongoing costs of maintaining a central beneficial ownership register. Donors should provide seed funding where it is required to develop and implement registers. Donors and international organisations should foster peer exchange and innovation to share economically efficient approaches to beneficial ownership transparency and apply lower cost solutions. Collecting, storing and making available structured and interoperable data reduces the ongoing cost of producing, using and maintaining the information.

Structured data can be readily incorporated into existing processes which can be more easily automated. Governments should capitalise on digital systems to reduce operational costs, for example, by applying automated processes to check aspects of the data. To ensure longevity of reforms, international organisations and others providing technical assistance should ensure knowledge is transferred to local actors.

More research is needed on funding models for registers that do not curtail data use, for instance, by charging companies for incorporation and filing, rather than charging users for data. Donors should support this kind of research into beneficial ownership transparency, along with other horizon issues, such as how to treat state-owned enterprises and investment funds within disclosure regimes. To facilitate analysis and maximise the use of beneficial ownership data, donors should also support improvements of other datasets, such as land and asset disclosure registers that are often combined with beneficial ownership data for anti-corruption purposes.

The needle on beneficial ownership transparency has moved considerably in a short amount of time. Many countries are now at a critical juncture for unlocking the full potential of this data to prevent and detect corruption, moving from commitment to implementation, and from data use to impact.

Endnotes

[1] National Intelligence Council (2021), Global Trends 2040: A More Contested World. Retrieved from https://www.dni.gov/index.php/gt2040-home/emerging-dynamics.

[2] Open Ownership (n.d.), The Open Ownership map: Worldwide commitments and action. Retrieved from https://www.openownership.org/en/map/.

[3] The Open Ownership Principles for Effective Disclosure provide a framework for implementing reforms that generate actionable and usable data across the widest range of policy applications of beneficial ownership data. See: Open Ownership (2021), Principles for Effective Beneficial Ownership Disclosure. Retrieved from https://www.openownership.org/en/principles/.

[4] See: Markle, A. (2022), Shining a light on company ownership: The role of beneficial ownership transparency in the energy transition. Policy brief, EITI and Open Ownership. Retrieved from https://www.openownership.org/en/publications/shining-a-light-on-company-ownership-the-role-of-beneficial-ownership-transparency-in-the-energy-transition.

[5] See, for example: Follow the Money (n.d.), Home page. Retrieved from https://followthemoney.net.

[6] Ezeigbo, C.E., Kiepe, T. and Russell-Prywata, L. (2021), Early impacts of public registers of beneficial ownership: United Kingdom. Open Ownership. Retrieved from https://www.openownership.org/en/publications/early-impacts-of-public-registers-of-beneficial-ownership-uk.

[7] White, A. and Milligan, E. (2020, 21 December), Jailed Banker’s Wife Loses Final Appeal on U.K. Asset Freeze. Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2020-12-21/jailed-banker-s-wife-loses-final-appeal-on-u-k-asset-freeze

[8] She continues to deny any wrongdoing. See: Bentham, M. (2022, 14 June), £16m Harrods big spender ‘should be given her jewels back’. Evening Standard. Retrieved from https://www.standard.co.uk/news/london/harrods-big-spender-zamira-hajiyeva-jailed-banker-husband-jewellery-b1005995.html.

[9] The now former MP has contested the allegations and court’s decisions; in March 2022 he was removed from office, see: Light, F. (2022, 01 April), Zelensky sacks ‘traitor’ generals. The Times. Retrieved from https://www.thetimes.co.uk/article/zelensky-sacks-traitor-generals-wbqkrr06r. Transparency International Ukraine (2021, 27 October), Kyva’s UAH 1.2 mln to be transferred to state budget. Retrieved from https://ti-ukraine.org/en/news/kyva-s-uah-1-2-mln-to-be-transferred-to-state-budget; Markle, A. (2022), Early impacts of public beneficial ownership registers: Ukraine. Open Ownership. Retrieved from https://www. openownership.org/en/publications/early-impacts-of-public-beneficial-ownership-registers-ukraine.

[10] Department for Business, Energy & Industrial Strategy, United Kingdom (2019), Review of the implementation of the PSC Register. BEIS Research Paper Number 2019/005, pp. 32-34. Retrieved from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/822823/review-implementation-psc-register.pdf.

[11] Kiepe, T. (2021), Making central beneficial ownership registers public Open Ownership. Retrieved from https://www.openownership.org/en/publications/making-central-beneficial-ownership-registers-public.

[12] Adebayo, T.H. (2022, 1 September), Pandora Papers: New UK law to end secret property investments by Nigerians, others. Premium Times . Retrieved from https://www.premiumtimesng.com/news/headlines/551733-pandora-papers-new-uk-law-to-end-secret-property-investments-by-nigerians-others.html.

[13] See: Open Ownership (n.d.), Open Ownership Register. Retrieved from https://register.openownership.org.

[14] Interview with four staff members from the Legal and Policy Department and Monitoring and Analysis Department, Zambian Financial Intelligence Centre, interviewed 11 October 2022.

[15] Organised Crime and Corruption Reporting Project (n.d.), About OCCRP Aleph. Retrieved from https://aleph.occrp.org/pages/about.

[16] Interview with OCCRP staff member, interviewed 6 October 2022.

[17] Baquero, A., Jaccard, N. and Ruiz, I. (2021), Gone with the Wind: Argentina’s Former First Family Used Luxembourg Companies to Reap $70 Million. Retrieved from https://www.occrp.org/en/openlux/gone-with-the-wind-argentinas-former-first-family-used-luxembourg-companies-to-reap-70-million; Government of Luxemboug (n.d.), Luxembourg Business Registers, Registre de Bénéficiaires Effectifs, “LARES CORPORATION S.A. SPF B210512”. Retrieved 3 July 2019 from https://www.lbr.lu/mjrcs-rbe/jsp/secured/ IndexActionSecured.action; Interview with OCCRP affiliated investigative journalist, interviewed on 29 September 2022.

[18] See: Luxembourg Business Registers (n.d.), Registre de Bénéficiaires Effectifs. Retrieved from https://www.lbr.lu/mjrcs-rbe.

[19] Baquero, A., Jaccard, N. and Ruiz, I. Gone with the Wind: Argentina’s Former First Family Used Luxembourg Companiesto Reap $70 Million.

[20] The term “request for information” is a translation of the Spanish term “exhorto” used by the interviewee, which may also translate to “letters rogatory”. See: Organization of American States (n.d.), Inter-American Convention on Letters Rogatory. Retrieved from https://www.oas.org/juridico/english/treaties/b-36.html.

[21] InfoCuria Case-law (2022, 22 November), Judgment of the court in Joined Cases C-37/20 and C-601/20. Retrieved from: https://curia.europa.eu/juris/document/document. jsf?text=&docid=268842&pageIndex=0&doclang=EN&mode=req&dir=&occ=first&part=1&cid=1571521; Registre de Bénéficiaires Effectifs (2022, 22 November), Warnings. Retrieved from https://www.lbr.lu/mjrcs-rbe/jsp/.

[22] Okunbor, E. and Kiepe, T. (2021), Beneficial ownership data in procurement . Open Ownership. Retrieved from https://www.openownership.org/en/publications/beneficial-ownership-data-in-procurement.

[23] Pitman, R. and Toroskainen, K. (2020), Beneath the Surface: The Case for Oversight of Extractive Industry Suppliers. Natural Resource Governance Institute. Retrieved from https://resourcegovernance.org/sites/default/files/documents/beneath_the_surface.pdf.

[24] Okunbor, E. and Kiepe, T., Beneficial ownership data in procurement.

[25] Knack, S., Biletska, N. and Kacker, K. (2017), Deterring Kickbacks and Encouraging Entry in Public Procurement Markets: Evidence from Firm Surveys in 88 Developing Countries. World Bank. Retrieved from http://documents.worldbank.org/curated/en/817871496169519447/pdf/WPS8078.pdf.

[26] Kiepe, T., Russell-Prywata, L. and Ponsford, V. (2020), Early impacts of public registers of beneficial ownership: Slovakia . Open Ownership. Retrieved from https://www.openownership.org/en/publications/early-impacts-of-public-registers-of-beneficial-ownership-slovakia; Pugh, S.A. (2022, 22 June), Connecting beneficial ownership data and public procurement in Kenya. Open Ownership. Retrieved from https://www.openownership.org/en/news/connecting-beneficial-ownership-data-and-public-procurement-in-kenya.

[27] European Commission (2020), ARACHNE risk scoring tool. Retrieved from https://ec.europa.eu/social/main.jsp?catId=325&intPageId=3587&langId=en.

[28] Ibid.

[29] Gillies, A. (2019), The EITI’s Role in Addressing Corruption. EITI. Retrieved from https://eiti.org/documents/eitis-role-addressing-corruption.

[30] EITI (2019), Requirement 2.5 Beneficial Ownership. The EITI Standard 2019. Retrieved from https://eiti.org/eiti-requirements.

[31] Interview with two staff members of the Monitoring and Coordination Department and Research Development and Sustainability Department, Nigeria’s Mining Cadastre Office, interviewed on 24 October 2022; Interview with Engr. Obadiah Simon Nkom, Director General of Nigeria’s Mining Cadastre Office in “New digital mining cadastral system for Nigeria” by Laura Cornish on 24 October 2022. Mining Review Africa . Retrieved from https://www.youtube.com/watch?v=WIuRJXjOszg; Nzor, E. (2022, 9 March), Cadastre office generates N9.384bn in three years, says Nkom. The Guardian. Retrieved from https://guardian.ng/business-services/cadastre-office-generates-n9-384bn-in-three-years-says-nkom/.

[32] For more information, see: Lakhani, S. (2022), The use of beneficial ownership data by private entities. Open Ownership. Retrieved from https://www.openownership.org/en/publications/the-use-of-beneficial-ownership-data-by-private-entities/.

[33] Petrobras (n.d.), Procedure for Due Diligence of Integrity (DDI) of Petrobras. Retrieved from https://transpetro.com.br/lumis/portal/file/fileDownload.jsp?fileId=40289086815E32410182654B547F1D.

[34] Lakhani, S., The use of beneficial ownership data by private entities.

[35] Interview with the former Business Development Manager of a multinational company that manufactures mining equipment, interviewed on 22 November 2022.

[36] Kollewe, J. (2022, 21 June), Glencore pleads guilty to bribery related to African oil operations.
The Guardian. Retrieved from https://www.theguardian.com/business/2022/jun/21/glencore-african-oil-operations.

[37] Seismic Change Needed at Glencore Following a Decade of Corruption (2022, 18 July). NRGI. Retrieved from https://resourcegovernance.org/news/seismic-change-needed-glencore-following-decade-corruption.

[38] Glencore (n.d.), Joint Venture beneficial ownership. Retrieved from https://www.glencore.com/who-we-are/transparency/joint-venture-beneficial-ownership; Glencore (n.d.), Our approach to transparency. Retrieved from https://www.glencore.com/who-we-are/transparency.

[39] Glencore (2022), Ethics and Compliance Report 2021. Retrieved from https://www.glencore.com/.rest/api/v1/documents/a80dbf3261d315ce78ab82b9c7a30627/GLEN-Compliance-Report_2021.pdf.

[40] Markle, A. (2022), Early impacts of public beneficial ownership registers: Ukraine; YouControl (n.d.), “RuAssets”, Home page. Retrieved from https://ruassets.com/; YouControl, Identifying hidden beneficiaries who may carry financial and reputational risks [Webinar] (2022, 27 September).

[41] At the time of writing, access to Ukraine’s Unified State Register of Legal Entities, Individual Entrepreneurs, and Civic Formations has been suspended due to the war with Russia.

[42] See, for example: YouControl (2017), How a YouControl user avoided the loss of UAH 300,000 and a lawsuit. Retrieved from https://youcontrol.com.ua/en/cases/yak-rozpiznaty-nedobrosovisnoho-kontrahenta-za-15-khvylyn.

[43] This study used a combination of leaked data and data from Luxembourg’s public beneficial ownership register.

[44] Bomare, J. and Le Guern Herry, S. (2022), Will we ever be able to track offshore wealth? Evidence from the offshore real estate market in the UK. EU Tax Observatory Working Paper No. 4. Retrieved from
https://www.dropbox.com/s/ogww2lellc034b2/Jeanne%20Bomare_BLGH_June2022_EUTOWP.pdf?dl=0.

[45] OECD (2021), Measuring Multinational Enterprises. Retrieved from https://www.oecd.org/sdd/its/measuring-multinational-enterprises.htm; the Open Ownership Register uses real world beneficial ownership data for over 8 million companies and allows for public analysis and interrogation of the data. See: Open Ownership (n.d.), Open Ownership Register. Retrieved from https://register.openownership.org/.

[46] Leask, D. and Smith, R. (2017, 27 March), Scots shell companies used to launder £4 billion out of Russia. The Herald. Retrieved from https://www.heraldscotland.com/news/15183346.scots-shell-companies- used-to-launder-4-billion-out-of-russia/.

[47] Crackdown plan on Scottish limited partnerships (2018, 29 April). BBC. Retrieved from https://www.bbc.com/news/uk-scotland-scotland-business-43935839; Global Witness (2019), Hard Data on Lessons Learned from the UK Beneficial Ownership Register. Retrieved from https://www.globalwitness.org/documents/19733/GW.Fact_Sheet_on_UK_Register_Data_for_US.May302019_w0hQoid.pdf.

[48] Higgins, R. and Donelly, B. (2022, 18 June), Inside the Secretive World of Irish Limited Partnerships. Bellingcat. Retrieved from https://www.bellingcat.com/news/2022/06/18/inside-the-secretive-world-of-irish-limited-partnerships/.

[49] Transparency International UK (2022), Partners in Crime: Analysing the potential scale of abuse of limited liability partnerships in economic crime. Retrieved from https://www.transparency.org.uk/sites/default/files/pdf/publications/Partners%20in%20Crime%20-%20Transparency%20International%20UK.pdf.

[50] Measures to verify the identity of beneficial owners were included in the Economic Crime and Corporate Transparency Bill introduced in September 2022. See: UK Parliament, “Economic Crime and Corporate Transparency Bill,” Bill 154 2022-23, originated in the House of Commons, Session 2022-23 (2022, 8 November). Retrieved from https://bills.parliament.uk/bills/3339.

[52] LLPs are a UK legal entity that provides limited liability to both partners, such as protection against negligence or misconduct by their partner, and which have other advantages for use in economic crime such as being low cost to incorporate and having light-touch reporting requirements.

[52] The sample used in the analysis of beneficial ownership data from the PSC register were limited because beneficial ownership reporting requirements only came into force in June 2016. A substantial amount of the incorporation activity for suspect LLPs took place between 2002 and 2015, and a substantial proportion of these were active for less than four years.

[53] TI-UK reported that issues with the quality of filings at Companies House did not allow for easy comparison of this proportion with the wider population of companies.

[54] Gillies, A., The EITI’s Role in Addressing Corruption.

[55] For more information, see: Joining the Dots (n.d.). Home page. Retrieved from https://peps.directoriolegislativo.org/.

[56] Interview with a staff member of the Directorio Legislativo, interviewed 5 October 2022.

[57] On sanctions, see, for example: Open Sanctions (n.d.). Home page. Retrieved from https://www.opensanctions.org; On real estate, see, for example, Adebayo, T.H. (2022, 1 September), Pandora Papers: New UK law to end secret property investments by Nigerians, others. Premium Times. Retrieved from https://www.premiumtimesng.com/news/headlines/551733-pandora-papers-new-uk-law-to-end-secret-property-investments-by-nigerians-others.html; On kleptocracy, see, for example: US Agency for International Development (2022), Dekleptification Guide: Seizing Windows of Opportunity to Dismantle Kleptocracy. Retrieved from https://www.usaid.gov/sites/default/files/documents/USAID_Dekleptification_Guide_FINAL.pdf.

[58] Gillies, A., The EITI’s Role in Addressing Corruption.

[59] Open Ownership (n.d.), The Open Ownership map: Worldwide commitments and action. Retrieved from https://www.openownership.org/en/map/.

[60] See: Thom Townsend (2020), Effective consultation processes for beneficial ownership transparency reform Open Ownership. Retrieved from https://www.openownership.org/en/publications/effective-consultation-processes-for-beneficial-ownership-transparency-reform/.

[61] The Open Ownership Principles for effective beneficial ownership disclosure provide a framework for implementing reforms that generate actionable and usable data across the widest range of policy applications of beneficial ownership data. See: Open Ownership (2021), Principles for Effective Beneficial Ownership Disclosure. Retrieved from https://www.openownership.org/en/principles/.

[62] Markle, A. (2022), “Opening Extractives Baseline Analysis” [unpublished]. EITI and Open Ownership.

[63] For more information, see: Rialet, J. (2022), Three continents, five projects, one goal: Improving extractives transparency [blog]. Open Ownership. Retrieved from https://www.openownership.org/en/blog/three-continents-five-projects-one-goal-improving-extractives-transparency.

[64] Fundeps (n.d.), Home page. Retrieved from https://fundeps.org/en/home.

[65] CTPD (n.d.), Home page. Retrieved from https://ctpd.org.zm.

[66] Mongolian Data Club (n.d.), Home page. Retrieved from http://www.dataclub.mn.

[67] Policy Alert (n.d.), Posts [Facebook page]. Retrieved from https://www.facebook.com/PolicyAlertNG.

[68] Directorio Legislativo (n.d.), Home page. Retrieved from https://directoriolegislativo.org/en.

[69] See, for example, Recommendations 3.1 and 3.2 from: NRGI (2022), Anticorruption Guidance for Partners of State-Owned Enterprises. Retrieved from https://soe-anticorruption.resourcegovernance.org/files/anticorruption_guidance_for_partners_state_owned_enterprises.pdf.

[70] For more information on how beneficial ownership transparency can contribute to the energy transition, see: Markle, A., Shining a light on company ownership: The role of beneficial ownership transparency in the energy transition.