Beneficial ownership data in extractive licensing: One year in

The Opening Extractives global peer exchange on embedding beneficial ownership in licensing screening gathered participants from mining, oil and gas regulators and company registers from Colombia, Ghana, Indonesia and Zambia.

Since 2020, Open Ownership has partnered with the Extractive Industries Transparency Initiative (EITI) on the Opening Extractives programme, a global initiative to improve the availability and use of beneficial ownership (BO) data in the extractive sector. Both organisations’ expertise merge in a key stream of work within the OE programme exploring how the use of BO data can strengthen licensing due diligence processes in mining, oil and gas.

Over the past year, the Opening Extractives team has worked with regulators in Armenia, Colombia, Ghana, Indonesia and Zambia towards integrating BO information into key decision-making processes in awarding, holding, transferring and renewing extractive licences and contracts. OE’s goal is to use these lessons to support better governance in extractives and other sectors, and to promote transparency in the energy transition.

Why is beneficial ownership data important?

There is agreement among many regulatory agencies in the sector that being equipped for informed decision-making with reliable, high-quality data is key to the part they play in realising domestic policy objectives. The drive to generate and sustain domestic revenues underlies many governance decisions in lucrative sectors like extractives, and using BO information in due diligence processes can serve a number of purposes in support of this, such as encouraging fair competition, detecting conflicts of interest and ensuring compliance of licence holders and applicants with eligibility requirements and legal obligations. BO data alone cannot solve all governance challenges, but it is a foundational tool for building a more comprehensive picture of where power and benefits lie, helping regulators make more informed, transparent and accountable decisions.

How beneficial ownership data can improve licensing decisions

Across countries, the OE team has identified common risks – outlined in a recent policy brief – that BO data can help mitigate.

One is corruption, a prevalent risk throughout the extractive value chain. BO data can flag potential undue influence or conflicts of interest in licensing decisions, such as where a politically exposed person is a beneficial owner of an applying company. Identifying these potential red flags early can mitigate risks at later points in the value chain by strengthening regulators’ ability to enforce regulations, and reducing the chance of embezzlement or misuse of funds as profits are generated.

Another risk is noncompliance with eligibility criteria such as nationality requirements. Giving preference to domestic companies in the award of contracts or reserving certain types of licences for local citizens may be part of broader local content regimes to mobilise domestic resources and support the local economy, but a common issue arises where foreign applicants use citizens as “fronts” to obtain licences with nationality requirements, such as artisanal and small-scale mining licences in Ghana and Zambia. Fronting and other attempts to evade eligibility criteria can be difficult to prove, but BO data can be used at the licensing stage to help identify potential indicators of fronting, such as minors being declared as beneficial owners, unusually frequent changes of ownership or discrepancies between declared BO information across different sources. On its own, BO data may not be enough to ascertain the presence of fronting, but looking at disclosed information about both the corporate applicant and its declared beneficial owners may raise red flags that point to the need for further checks.

These are just a few examples of the potential value of BO data in licensing and contracting. Specific risks vary by country and will be prioritised differently, but exploring how they present across a range of settings will build a clearer sense of how the active use of BO data can mitigate risks and achieve better policy outcomes.

Lessons learned from beneficial ownership data users

In this initiative, the OE team has engaged both with licensing authorities as users of BO data, and with BO central registrars as implementers of the systems where this information is usually held. Interactions between data users and implementers are perennially valuable in clarifying users’ specific needs and the roles that agencies have in relation to one another. These engagements have highlighted the expected needs of licensing authorities using BO data in this way, and how systems can be built or upgraded to meet these. Some key takeaways include:

• The need for structured data to reduce errors when disclosing information and to simplify cross-checking with other data sources, such as sanctions lists or national identity databases.
• The value of collecting and enabling access to historical records; this enables authorities to see not just current beneficial owners but also past ones in order to track ownership changes over time throughout a licence’s period of validity, which in some cases can be many years.
• The need for users to know that data is reliable (although data does not have to be perfect in order to be useful). Interactions between licensing authorities and registries have further emphasised the point that data users can have an important role to play in improving data quality; while the formal responsibility for verifying data sits with the central registry, licensing authorities can be well placed to spot suspicious or anomalous information based on local sector knowledge. This underlines the need for robust reporting mechanisms between users and implementers. Regulators might also play a part in ensuring information is up to date by requiring licence applicants to update their BO information as part of the licence application process. In Armenia, for example, the central registrar and the ministry in charge of licensing are taking steps to work more closely to cross-check information about potential licence holders.

Participants during the peer exchange on embedding beneficial ownership in licensing screening shared successes and challenges during interactive sessions. 

Moving forward

Beneficial ownership transparency is about more than just setting up a register, and these discussions have built a fuller picture of the conditions in which data is well used and delivers impact. Countries like Armenia, Ghana and Zambia are already driving change through institutional, legislative, technical and political reforms, and their experiences will pave the way for others. As a growing number of countries adopt these practices, BO information will become an increasingly important tool for transparent and accountable governance, in extractives and beyond.