Revealing who stands behind the companies

Revealing who stands behind the companies

The identity of the real owners – the ‘beneficial owners’ – of the companies that have acquired rights to extract oil, gas and minerals is often unknown, hidden behind a chain of corporate entities.

This opacity can contribute to corruption, money laundering and tax evasion in the extractive sector.

With the adoption of the 2016 EITI Standard, EITI Board decided that beneficial ownership disclosure would be mandatory for implementing countries. All companies operating in EITI countries would now have to disclose the name and identity of the owners. As a first step, countries need to develop a roadmap for making this happen. At the Global Conference in Lima, the EITI Board looks set to decide that the requirements on beneficial ownership will take effect on 1 January 2020.

Eleven EITI countries have attempted to address the challenge of identifying the real owners. Burkina Faso, the Democratic Republic of the Congo (DRC), Honduras, Kyrgyz Republic, Liberia, Niger, Nigeria, Tajikistan, Tanzania and Zambia piloted beneficial ownership disclosure.

Beneficial ownership is now successfully placed on many national EITI agendas and the pilot exercise contributed to the global momentum of tackling hidden ownership. It has led to discussions about legal  and regulatory changes aimed at mandating the filing and disclosure of beneficial ownership information, identified gaps in government’s regulatory and monitoring capacities, and recommended the establishment or integration of beneficial ownership data in public registers.

The pilot exercise revealed the difficulties in obtaining reliable and comprehensive beneficial ownership information. Some of the difficulty is due to confusion surrounding the concept of beneficial ownership versus legal ownership and insufficient outreach, guidance and time to complete declaration forms. However, many countries lack an enabling legal framework for beneficial ownership disclosures and the pilot exercise shed light on the challenges countries face when company ownership is structured across multiple jurisdictions.

The pilot exercise offered some solutions, equipping implementing countries with a good foundation for improving disclosures. It has also confirmed that using EITI reporting as a means of collecting beneficial ownership data is a viable solution even if there still seems to be a considerable way to go before countries are able to provide comprehensive disclosures.