Beneficial Ownership Transparency: A Guide for Parliaments
Overseeing Beneficial Ownership Transparency
Parliaments must play a pivotal role in overseeing the effective implementation of BOT reforms by scrutinizing government policies, assessing funding allocations and investigating potential departure from the goals and the implementation of the reforms. Crucially, legislatures are responsible for holding relevant authorities accountable, using measures such as summoning officials, conducting public hearings and reporting findings, as explained below. Parliamentarians can also try to leverage the information derived from analyses of collected BO data to bolster scrutiny of government actions, especially in areas such as enforcing ethical standards and overseeing public projects and appointments.
"Legislatures are responsible for holding relevant authorities accountable, using measures such as summoning officials, conducting public hearings and reporting findings"
Budgetary Oversight
The North Macedonian Assembly’s Hall Macedonia. Source: NDI
Parliaments can ensure the effective implementation of BOT reforms by actively participating in budget formulation. They play a crucial role in securing adequate budget allocations for maintaining the BO database, ensuring that necessary human and financial resources are allocated during both the budget formulation and implementation phases. For example, in its June 2022 mid-year budget review, the Canadian parliament’s Banking, Commerce and the Economy Committee recommended the government allocate “enough financial and human resources for the enforcement and prosecution of criminal activities uncovered through analysis of the information gathered in the registry.” Parliaments may also ask the government to consider and report on various costing options for the sustainability of the BO registry while ensuring that basic access remains free of charge or that any cost-recovery approaches do not undermine impact. For instance, the U.K.’s Companies House funds the BO registry through fees for business incorporation, North Macedonia through user access fees for AML-regulated entities while other countries (including Nigeria, Kenya and others) rely on annual budget appropriations to fund the functioning of the registry.
"Parliaments may also ask the government to consider and report on various costing options for the sustainability of the BO registry"
Post-Legislative Scrutiny (PLS)
Parliaments can conduct post-legislative scrutiny to comprehensively track the impact of BOT reforms. This involves assessing the outcomes and effectiveness of the implemented laws, including by requesting impact assessments from relevant authorities – such as the post-implementation review conducted in 2019 in the U.K. Through PLS, legislatures can identify gaps or potential adverse effects, ensuring that the reforms fulfill their intended purposes. This process is vital, especially considering that BOT reforms are relatively new, and their impact is continually evolving.
Drafting Secondary Legislation
Parliaments can actively oversee the drafting of secondary legislation by the government to ensure that it aligns with the legal frameworks and policy goals established in the primary legislation. This involves confirming that the right beneficial ownership information is collected and the process remains clear and accessible to disclosing entities. Regular updates on regulatory efforts and their impact can be demanded using parliamentary oversight tools. For example, legislators held a hearing in the U.S. to learn more about delayed BOT rulemaking efforts from the executive branch agency Financial Crimes Enforcement Network (FinCEN).
Parliamentary Questions and Interpellations
Parliaments can use parliamentary questions and interpellations as effective tools to track the progress of BOT reforms. Committees focused on anti-corruption or oversight can use these mechanisms to verify that the government is adhering to a clear roadmap for BOT implementation. Additionally, legislatures can request the government to develop national risk assessments, specifically considering the role of BOT in addressing applicable risks. For example, the U.S. Congress mandated in the 2021 U.S. National Defense Authorization Act that the U.S. Treasury Department conduct a study on how works of art can facilitate money laundering and terrorist finance. Section 6110(c), as part of the Anti-Money Laundering Act of 2020, “directs the U.S. Department of the Treasury to study the facilitation of money laundering (ML) and terror finance (TF) through the trade in works of art” as well as “complete its ongoing work to close outstanding gaps in the U.S. AML/CFT regime related to beneficial ownership.”
Committees
Parliamentary committees, especially those focused on anti-corruption or oversight, can actively engage in oversight efforts. Committees can demand regular updates from the government on various aspects, including reporting guidelines, data verification processes and the streamlined usage of BOT data across different government institutions. Holding hearings, like the above-mentioned example in the U.S., where legislators discussed delayed BOT rulemaking efforts, allows for in-depth exploration and evaluation of the government’s actions. For example, the European Parliament Committee of Inquiry into Money Laundering, Tax Avoidance and Tax Evasion (2017) found that some company registers and local authorities do not require or share information on a company’s beneficial owners and that such companies can be used for money laundering and tax evasion. At the time of the inquiry, only six of the EU member states had implemented the required fourth anti-money laundering directive and called on the remaining member states to implement the directive urgently.
Reports and Requests
Parliaments can request comprehensive reports from the government detailing the impact and usage data of BOT reforms. These reports, when presented to the public, contribute to transparency and accountability. For instance, the U.K. House of Commons actively requests updates on BOT implementation, especially in the British overseas territories and Crown Dependencies, emphasizing the importance of parliamentary involvement.
Committees of Inquiry
Parliaments can initiate committees of inquiry into money laundering, corruption or related issues. Such committees can specifically request information about and assess the impact of BOT reforms in particular areas. One example is the Cullen Commission of Inquiry into Money Laundering in British Columbia, Canada. The Commission’s final report in 2022 recommended the establishment of a publicly accessible pan-Canadian corporate beneficial ownership registry, which the Canadian government is working toward in 2024. Another example is the European Parliament Committee of Inquiry into Money Laundering, Tax Avoidance and Tax Evasion, which identified gaps in beneficial ownership information sharing and called for urgent implementation of required directives.
Delegated Authorities
Parliaments can exercise scrutiny over how the executive handles BOT reforms, ensuring a consultative approach involving various actors. Requesting reports from agencies, organizing public hearings, and inviting experts and civil society representatives to share independent evaluations are essential to overseeing delegated authorities. Regular consultations with disclosing entities can provide valuable insights into the impact of reforms.
Using BO Information
Parliaments can leverage BO data for diverse oversight activities in other sectors. This includes using the information when assessing candidates for high-level offices (for instance, by verifying the accuracy of their asset disclosures), understanding industry competition, scrutinizing public contracting projects and conducting national security assessments. The multifaceted use of BO data can also enhance the effectiveness of parliamentary oversight in various domains.
"The multifaceted use of BO data can also enhance the effectiveness of parliamentary oversight in various domains."