Towards A Global Norm Of Beneficial Ownership Transparency
March 2019Towards a Global Norm of BeneficialOwnership TransparencyA scoping study on a strategic approach toachieving a global norm
This report was prepared by a team of consultants – Justine Davila, Michael Barronand Tim Law - for Adam Smith International, who were commissioned by the UKDepartment for International Development to prepare this scoping study.The views expressed are based on interviews conducted by the authors with a widerange of stakeholders between September and December 2018 (see Appendix 1 forlist of stakeholders) and review of publicly available documents or sources providedby interviewees. This independent scoping report captures the range of views of thesestakeholders and is not necessarily the position of the UK Government.This paper aims to convey the issues in a way which is accessible to the moregeneralist reader as well as the technical specialist in beneficial ownership issues. Assuch, reference to further specific technical terms and guidance is included in thefootnotes where a more general reference is made in the main text.In terms of scope, this paper considers primarily beneficial ownership transparency(BOT) for corporate structures while noting emerging trends on other legalarrangements such as trusts. It considers the role of BOT in promoting anti-corruption,including through tackling money-laundering, and fostering a more open andcompetitive investment climate. It does not cover the role of BOT in tackling otherchallenges, such as tax evasion, in detail.The scoping study is being conducted in phases: For Phase 1, the team completed a background discussion paper for a PanelSession “Towards a Global Norm of Beneficial Ownership Transparency” at theInternational Anti-Corruption Conference (IACC) October 2018. This comprisedan initial rapid review of the current trends towards BOT, the state of theinternational architecture and provision of support to countries addressing thechallenges of implementation. This Phase 2 paper is a more in-depth study following up on the initial findingsof Phase 1 by: mapping the international and national architecture andcommitments on BOT and the roles of different stakeholders; assessing thecurrent level of evidence of the impact of BOT; consulting partners fromgovernments, international organisations; private sector and civil society ontheir views on BOT; assessing what is needed to set up a national BO registerand the technical assistance currently available. The paper assesses differentapproaches to harnessing international and national leadership to establishBOT as a global norm and makes recommendations for possible futureapproaches and sequencing.
Acronyms, abbreviations and IEU MSEU ti-money launderingAutomatic Exchange of InformationBeneficial ownershipBeneficial ownership disclosureBeneficial ownership data standardBeneficial ownership transparencyBusiness Registry Interconnection System (for EU registries)Corporate Affairs Commission (Nigerian Register)Crown DependencyCountering the Financing of TerrorismUK Department for International DevelopmentExtractives Global Programmatic Support (World Bank Trust Fund)Extractive Industries Transparency InitiativeEU Member StatesEU Fourth or Fifth Anti Money Laundering DirectiveFinancial Action Task ForceFATF-style regional bodiesInternational Anti-Corruption ConferenceInternational Financial InstitutionsOrganisation for Economic Cooperation and DevelopmentMaking all Voices CountOpen Government PartnershipOpen OwnershipOverseas TerritoryPeople with Significant Control (UK Register)Tax Justice NetworkValue for MoneyBO A Beneficial Owner is a real individual who ultimately owns orcontrols all or part of a company. This ownership or control may beexercised directly or indirectly through a chain of ownership orcontrol in other companies. In some cases, ownership by a listed company or a governmententity may mean that beneficial ownership is not traced back to anatural person.BOD Beneficial ownership disclosure refers to provision of BOinformation to certain users, often called “competent authorities”,such as law enforcement. This information is not publicly available.BOT Beneficial ownership transparency refers to publicly accessibleinformation on ultimate beneficial owners. Ideally this would also be in a central register, completely free toaccess and in open data format.Norm We understand a norm to be a widespread or usual and acceptedpractice. It can refer to a standard of behaviour that is required,designated or desired or normal. In this context a norm would represent a state where BOT is theexpected default approach by countries. It does not precludeexceptions.Standard A level of quality or achievement, used to judge or benchmark thequality of something else. In this context we understand this to be more formalised than anorm, including through endorsement by a credible group oftechnical experts and governments.
CONTENTSEXECUTIVE SUMMARY . 51.MAPPING OF INTERNATIONAL AND NATIONAL ARCHITECTURE . 10International architecture . 10Norms with established global reach. 11Regional norm encompassing publicly accessible registers . 17Pioneering efforts to establish a norm in a sector . 19Establishing BOT in public procurement . 19Tools for open data and interoperability . 20Platforms fostering momentum on BOT . 20Timescales for establishing global norms . 22Lesson learning on BOT. National Architecture . 23Denmark . 24France . 24Ghana (See also Appendix 2) . 25Nigeria . 25UK . 25Ukraine . 26How approaches are converging . 27BENEFITS AND IMPACT OF BOT . 33Effects, consequences, impact and effectiveness of BOT . 33Potential impact of effective BOT . 34Increased efficiency for law enforcement . 35More efficient due diligence processes for regulated entities . 37Increased transparency improving the business environment . 382.42.5Potential for further benefits to economic growth and investment . 39Potential for risks to local economies . 39Improving government accountability for action against corruption and other illicit flows . 40Selected lessons on BOD and tax evasion . 42The business case for BOT . 43Business risks . 43BOT as part of the solution . 44Business response to date . 45Lessons learned from other initiatives to engage business. 46Implementation: the role of business . 473.SETTING UP AN OPEN PUBLICLY ACCESSIBLE BOT REGISTER . 493.1.3.2.Timescales for implementation . 50Key stages of establishing a registry . 513.2.1.Generating political commitment. 523.2.2.3.2.3.3.2.4.Translating political commitments into implementation . 53Legislative and regulatory frameworks . 54Setting up the register . 553.2.5.3.2.6.3.2.7.Resourcing requirements for establishing and maintaining a register . 56Governance arrangements . 57Managing data . 57
3.2.8.3.2.9.Ensuring data is accurate and reliable, including verification . 58Data protection and privacy . 603.3.BOT as part of a wider anti-corruption system . 624. DEMAND FOR TECHNICAL SUPPORT AND THE ASSISTANCE CURRENTLYAVAILABLE . 634.1International Financial Institutions. 654.2Existing standard-setters . 664.34.44.5Providing TA through bilateral or multilateral programming . 67International civil society . 67Private sector and professions . 68FUTURE APPROACHES TO HARNESSING NATIONAL AND INTERNATIONALACTION TO ESTABLISH A GLOBAL NORM . 695.1.Four options for working towards a global norm. 70Option 1: Organic growth in BOT – continue as now . 71Option 2: Scale up existing approaches . 72Option 3: International campaign with a new technical standard and scale-up of TA . 76Option 4: Multi-pronged approach. 786.ADDITIONAL TECHNICAL SUPPORT NEEDS AND RECOMMENDATIONS . 86Pros and cons of options . 87Option 1: Increase resourcing and volume of TA from existing sources. 87Option 2: Establish a dedicated Multi-Donor Trust Fund. 89Option 3: Establishing a new institution focused on BOT over time with TA facility . 89Options 4 and 5: Private sector facility and pro-bono support from professions . 90Option 6: Public-private funding . 917.NEXT STEPS. 93APPENDIX 1: LIST OF STAKEHOLDERS . 95APPENDIX 2: GHANA CASE STUDY . 974
Executive summaryThis paper was commissioned to consider the question “what action is required toachieve a global norm of beneficial ownership transparency?” Anonymouslyowned companies1 facilitate grand corruption and laundering of the proceeds ofcorruption. They can also enable other harmful flows including tax evasion, organisedcrime and terrorist financing. These flows, and the corporate and other structureswhich facilitate them, are international, operating across borders, therefore policymakers are recognising that the action required to address them similarly requires aglobal effort, to manage the risk that illicit flows are simply diverted.A growing cohort of countries is already committing to publicly accessibleregisters of beneficial ownership as one of a range of approaches to tackle thesechallenges. Some countries have already made significant progress withimplementation, for example in Denmark, the UK and Ukraine. Eight countries(Afghanistan, France, Ghana, Kenya, the Netherlands, Nigeria, Tanzania, andUkraine) made explicit commitments to public registers at the London Anti-CorruptionSummit 2016, where others made related commitments to beneficial ownershiptransparency in public procurement, property and extractives. Thirteen countries hadmade commitments to implement or explore aspects of beneficial ownershiptransparency in their Open Government Partnership Action Plans by December 2018.By 2020, EU Member States subject to the Fifth Anti-Money Laundering Directive willalso be required to legislate for publicly accessible registers of company beneficialownership. The Extractive Industries Transparency Initiative (EITI) will also require its51 implementing countries to collect and publish beneficial ownership information forcompanies bidding for and operating extractives licences. Thus, the momentum onBOT has already moved beyond campaigning efforts by international civil societysuch as Transparency International and Global Witness into adoption andimplementation.Beneficial ownership transparency (BOT) is emerging as a new norm ascountries recognise that closed systems of beneficial ownership disclosure forlaw enforcement to share information are necessary but not sufficient fortackling money-laundering and corruption, as well as other illicit flows.However, BOT is not yet considered the usual way of operating everywhere, sothat governments, businesses and citizens across the globe can share thisinformation efficiently to maximise their impact on corruption.Policy-makers are adopting beneficial ownership transparency (BOT) as a tool todeliver a variety of objectives although, since implementation is at an early stage,work is just beginning on gathering evidence of impact and effectiveness of thesepolicy initiatives. Greater transparency allows independent oversight by national andinternational civil society, to hold individuals and countries to account for actionon corruption, money -laundering and tax evasion. This can encourage more robustaction, particularly where political will is weaker. It is also argued that BOT acts as adeterrent to corruption, and other illicit behaviour, increasing the risk of detection.1In terms of scope, this paper looks primarily at BOT for corporate structures while recording emerging trends on otherlegal arrangements such as trusts.5
Public registers also enable governments to promote prosperity through a moreopen investment regime and value for money in public procurement.Information on beneficial ownership is also part of the evidence gathered by lawenforcement and other authorities to trace money-laundering, corruption orother illicit activity, and by the private sector for due diligence – therefore these userscan also achieve efficiency gains if such information is made more easily accessibleand accurate through open publicly accessible registers. There is anecdotal evidencethat BOT is affecting incentives, but more systematic and concerted efforts togather evidence on how BOT information is being used by these differentgroups and its impact would assist in making the case for BOT with others andsupport design and implementation.Countries looking to disclose beneficial ownership are aligning with a range ofestablished and emerging norms (See Section 1.2) by making internationalcommitments and/or observing existing guidance and formal Standards as they workto implement disclosures: The existing norms which encompass beneficial ownership and have a broadgeographical reach are the FATF Standards, which aim to tackle moneylaundering and counter the financing of terrorism (AML-CFT) whilerecognising the important role that anti-money laundering systems play intackling corruption, and the OECD Global Forum Standards on taxtransparency. Given their wide country coverage the FATF and OECDStandards are considered the existing global norms on beneficialownership disclosure (BOD); ensuring that “information on their beneficialownership is available to competent authorities without impediments2”, butthey do not currently require countries to implement transparency (BOT)i.e. publicly accessible beneficial ownership information.A range of other sectoral or regional norms are emerging which do requirebeneficial ownership transparency, notably the EITI Standard 2016 and theEU 5AMLD. Each has a different but overlapping geographical coverage.Efforts are underway to distil lessons on how co
Session “Towards a Global Norm of Beneficial Ownership Transparency” at the International Anti-Corruption Conference (IACC) October 2018. This comprised an initial rapid review of the current trends towards BOT, the state of the international architecture and provision of support to countries addressing the challenges of implementation.
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The International Norm Context 9 2.1. Definition of a Norm 9 2.2. The Norm of Sustainability 12 2.3. International Relations Theories and Norms 13 2.4. The Life Cycle of a Norm and the Ecological Footprint 14 . , Inter
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