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Governance: Beneficial ownership

The following indicator is under consideration for this pilot edition of the Barometer: To what extent do relevant laws, regulations, policies, and guidance provide a basis for collecting and publishing structured beneficial ownership data on companies?

Definitions and Identification

"A beneficial owner is a natural person who has the right to some share or enjoyment of a legal entity’s income or assets (ownership) or the right to direct or influence the entity’s activities (control). Ownership and control can be exerted either directly or indirectly." (Open Ownership, 2020)

A public register of the beneficial owners of companies extends beyond registration of the immediate shareholders or directors of a company, to require identification and disclosure of the natural persons (individual named people) who exercise ultimate ownership or control - even if this ownership or control involves multiple intermediate companies or relationships. For more, please review ****this primer on beneficial ownership concepts.

Beneficial ownership disclosure laws and frameworks are relatively new, and may have only been created in the last few years. Frameworks for beneficial ownership disclosure may exist covering all companies in a jurisdiction, or may only exist for specific sectors, such as extractives, or companies involved in public procurement. Some frameworks do not require a central register, and some do not allow public access to the collected data.

If there is no framework in place, but your research identifies ongoing campaigns, advocacy or legislative processes that could create a framework, please make a note of this in the justification section.

Starting points

  • Sources:

  • Search:

    • European Union countries were required by the 5th Anti-Money Laundering Directive to introduce measures for central beneficial ownership registers. Search for information on transposition of AMLD5 into national legislation.
    • 'Beneficial ownership' and country name: look for news of recent consultations, laws, or debates. Often corporate service firms will report on new regulations or frameworks being introduced for a given country.

  • Consult:

    • Company transparency advocates (e.g., Transparency International chapters) ****
    • Company registration agents

What to look for?

Look for evidence that can answer the following questions:

  • Is there a current or planned requirement for companies to disclose their beneficial ownership to authorities, and will some or all of this information be made available to the public?
  • Does a company declaring their beneficial ownership only do this once, or is there a process set out in the framework for regular updates? (e.g., when ownership changes, or through annual reporting)
  • Does the framework seek to ensure the quality of the data? For example, are any bodies empowered to ensure accurate and timely data? Is a verification process required?

National and sub-national considerations

Where company registration is a sub-national responsibility, beneficial ownership disclosure may also take place sub-nationally. If you identify a sub-national unit with a stronger frameworks than any national framework that might exist (or not), assess this and choose the appropriate answer to the "How widely do these laws, regulations, policies, or guidance apply?" question.

Show/hide supporting questions

Existence

  • Are there laws, policies, or regulations requiring collection or publication of this information in any form?

    • No.
    • They are being drafted, or are not yet implemented.
      Supporting questions: Please provide brief details.
    • They exist and are operational.
      Supporting questions: Please provide brief details.

  • Do relevant laws, policies, regulations, or guidance discuss collection and publication of structured and open data?

    • There is no mention of data in relevant laws, policies, or guidance.
    • Requirements to collect OR publish data are set out in non-binding policy or guidance.
      Supporting questions: Please provide a URL to the most relevant legislation, policy, or guidance.
    • Requirements to collect AND publish data are both set out in non-binding policy or guidance.
      Supporting questions: Please provide a URL to the most relevant legislation, policy, or guidance.
    • Requirements to collect AND publish data both exist, and one is set out in binding policy, regulations, or law.
      Supporting questions: Please provide a URL to the most relevant legislation, policy, or guidance.
    • Requirements to collect AND publish data are both set out in binding policy, regulations, or law.
      Supporting questions: Please provide a URL to the most relevant legislation, policy, or guidance.

Elements

  • Provisions for definitions, kinds, and fields:

  • Definitions comprehensively cover ownership. (No, Partially, Yes) For 'Yes', definitions should require disclosure interests held indirectly. Answer 'Partially' if only direct ownership is covered.

    Supporting questions (conditional)

    If Partially or Yes: Please indicate which section of the framework refers to this issue.

    If Partially or Yes: If the framework sets a threshold below which a share of ownership does not need to be disclosed, please provide it here (e.g. 25%).

  • Definitions cover control. (No, Partially, Yes) For 'Yes', definitions should have a provision to capture 'other significant methods of control' beyond those explicitly listed in order to limit loopholes. Answer 'Partially' if the definition only specifies a limited set of forms of control.

    Supporting questions (conditional)

    If Partially or Yes: Please indicate which section of the framework refers to this issue.

    If Partially or Yes: If the framework sets a threshold below which a share of control does not need to be disclosed, please provide it here (e.g. 25%).

  • Rules or processes exist to protect certain natural persons who are beneficial owners from having their data published. (No, Partially, Yes)

    Supporting questions (conditional)

    If Partially: Please indicate which section of the framework refers to this issue and explain your 'Partially' response.

    If Yes: Please indicate which section of the framework refers to this issue.

  • Provisions for data quality:

  • The framework requires a verification process. (No, Partially, Yes)

    Supporting questions (conditional)

    If Partially: Please briefly explain the verification process used, and which parts of collected data the framework requires to be verified and which parts it does not.

    If Yes: Please briefly explain the verification process used.

  • The rules/guidance empower an agency or official to ensure the accurate and timely collection and publication of required data. (No, Partially, Yes)

    Supporting questions (conditional)

    If Partially: Please indicate which section of the framework refers to this issue and explain your 'Partially' response.

    If Yes: Please indicate which section of the framework refers to this issue.

  • Provisions for openness, timing, and structure:

  • The rules/guidance require beneficial ownership data to be collected in a central register or database. (No, Partially, Yes)

    Supporting questions (conditional)

    If Partially: Please indicate which section of the framework refers to this issue and explain your 'Partially' response.

    If Yes: Please indicate which section of the framework refers to this issue.

  • The rules/guidance require that data is regularly updated. (No, Partially, Yes)

    Supporting questions (conditional)

    If Partially: Please indicate which section of the framework refers to this issue and explain your 'Partially' response.

    If Yes: Please indicate which section of the framework refers to this issue.

  • The rules/guidance support publication of open data. (No, Partially, Yes)

    Supporting questions (conditional)

    If Partially: Please indicate which section of the framework refers to this issue and explain your 'Partially' response.

    If Yes: Please indicate which section of the framework refers to this issue.

Extent

  • How widely do these laws, regulations, policies, or guidance apply?
    • They cover a limited number of localities or companies (e.g., only companies operating in a single sector or in a single sub-national jurisdiction/state).
      Supporting questions: Please briefly describe limits on coverage (e.g. which locality, type of company, or context for registration).
    • They cover, or are representative of those covering, many localities or companies.
      Supporting questions: Please briefly describe limits on coverage (e.g. which locality, type of company, or context for registration).
    • They cover the majority of limited companies in the country.
      Supporting questions: Please briefly describe limits on coverage (e.g. which locality, type of company, or context for registration).

Beneficial ownership data is valuable for a wide range of use-cases, including:

  • Supporting anti-corruption and anti-money laundering investigations;
  • Enabling business intelligence and corporate due diligence;
  • Supporting cross-border and wealth taxation;
  • Governance of extractive industries and other high risk sectors.

Lord (2019) describes how, over the last decade, three issues have come together to support a push for improved corporate data sharing, and, in particular, better collection and sharing of data on beneficial owners:

  • the 2008 financial crisis brought into relief the “dangers of uncertain information and unknown actors in financial markets”
  • a 2011 World Bank’s report on the abuse of anonymous companies; and
  • international taxation and anti-money laundering reforms.

These have all worked to highlight the need for interchangeable data not only on firms, but also on their ownership structures and the natural persons behind them. The concept of Beneficial Ownership has rapidly gained traction within the corporate information landscape, with countries creating requirements for companies to disclose the individuals who have ultimate ownership or control of legal entities, cutting through layers of shell corporations or other complex arrangements (Low and Kiepe 2020; Russell-Prywata 2020).

Case studies from the Financial Accountability Task Force describe how some countries have responded to new requirements for beneficial ownership disclosure through updates to existing corporate registers, whilst others have developed parallel beneficial ownership registers, or disclosure regimes (FATF/OECD 2019).

As the legal and regulatory frameworks for beneficial ownership transparency will virtually all have originated in an era where administrations should be aware of the potential value of structured data, tracking how far these explicitly incorporate awareness of data can offer important insights into how far countries are taking a data-aware approach to new regulatory activities.