Beneficial ownership transparency in Armenia: scoping study

Introduction

Recent years have seen a shift in attitude in international policy circles regarding the creation of public beneficial ownership (BO) registers: tools that enable firms, governments, and the public to see who really controls or benefits from companies. Whereas the case for BO registers was initially championed principally by campaigning organisations, their benefits and impacts are now widely recognised by governments and international policymakers. Worldwide, more than 80 countries have made commitments to implement BO registers for at least one industry sector,[1] but there are still comparatively few examples of full implementation and publication. This means beneficial ownership transparency (BOT) remains an emerging policy field in which each experience of implementation provides significant policy and systems learnings that can be adopted elsewhere.

Within those countries that have already introduced BO registers, some notable differences in the reform process can be discerned. One approach, adopted in the UK and Ukraine, is to introduce requirements simultaneously, on companies operating across the whole economy, to disclose their beneficial owners. Other countries have first focused on one sector or category of company, in some cases using this as a foundation for requiring later disclosures in other sectors. There are advantages and disadvantages to either approach. For some countries, prioritising implementation of disclosure requirements for one sector may facilitate more rapid progress than with the cross-economy approach, especially if it enables implementers to leverage the political will for pro-transparency reform in an area of economic activity associated with higher corruption risk. However, this same approach to implementation can also bring risks that lawmakers may not subsequently apply disclosure requirements to other areas of economic activity, should political priorities change or opposition to reform mount, in the intervening period.

Reforms in Armenia

Implementation of BO reform in Armenia, the subject of this report,[2] provides an excellent case study of the “one-sector-first” approach. The country has initially prioritised BO disclosures for its mining sector – driven by a political commitment to tackling corruption and significant civil society pressure – and is also due to expand disclosure requirements to apply to all industry sectors by the end of 2020.

Clear, high-level political commitment to the cause of BOT in Armenia, as well as the dedication of the officials within the individual agencies responsible for overseeing implementation, has driven commendable progress. By April 2020, the country had established the necessary legislation and processes for obtaining BO information from the mining sector, and had published the disclosures from firms operating in that industry. Government agencies have shown a willingness to learn lessons from this initial pilot programme and to improve the policies and systems necessary for the upcoming economy-wide disclosure regime.

Throughout the reform process, Open Ownership (OO) has provided technical assistance on both policy and systems-related issues to the government agencies leading Armenia’s BO programme. In October 2019, the Ministry of Justice signed a Memorandum of Understanding with OO to deepen this collaboration, providing the basis for our subsequent series of in-country missions and remote technical assistance initiatives. OO will continue to provide our highest level of support as the country progresses towards implementing economy-wide disclosures. This report is a key aspect of this support, contributing to discussions in Armenia regarding further improvements to the BO regime before and after the sectoral scope of required disclosures expands.

Methodology and report structure

The information contained in this report is based on a series of interviews with key stakeholders involved in advancing BOT in Armenia. Many of these were conducted during three in-country visits to Armenia in late 2019 and early 2020, as part of OO’s ongoing technical assistance programme. The information obtained from these visits, and from subsequent remote assistance and desk research, has informed the content of this study. During this work, OO has collaborated closely with representatives from the Ministry of Justice and Armenia’s Extractives Industries Transparency Initiative (EITI) Secretariat, as well as the Open Government Partnership (OGP) liaison in Armenia, the Ministry of Territorial Administration and Infrastructure (whose remit includes mining licensing), and the Armenian State Registry.

This report aims to provide useful input into how Armenia should further develop its BO disclosure regime and expand this to apply to other industry sectors. We have used OO’s nine Principles of Effective Beneficial Ownership Disclosure [3] as the basis for our evaluation of Armenia’s current and planned reforms in this area. The Principles describe a range of policy, legal, and systems, data, and technology characteristics that support publication of easy-to-use, accurate, and interoperable BO data. They have been reached through OO’s work developing the Beneficial Ownership Data Standard (BODS) and supporting almost 40 countries to advance BOT. For each Principle, we have provided a short analysis of how Armenia’s disclosure regime compares to the Principles identified along with recommendations for how the country could further strengthen its policies and processes.

A note on implementation timelines

The implementation timetables outlined in this report are based largely on plans and commitments made before the COVID-19 outbreak and its effects on global political, transport, and health systems. Accordingly, discussions in this report regarding dates for legislative reform, systems development, and data publication in Armenia remain provisional and subject to change. We additionally recognise that some actions that have been an important part of reforms towards greater BOT elsewhere – for example, holding in-person meetings or public gatherings for consultation – may not be possible until the public health situation has improved.

Next page: The Context for Reform