Beneficial ownership transparency in the Philippines

Executive summary

The Philippines is an early implementer of a beneficial ownership (BO) disclosure regime in the Asia-Pacific region. Since 2001, it has enacted anti-money laundering and combating the financing of terrorism (AML/CFT) laws and a robust set of regulations that effectively mandate BO disclosure. These efforts were driven mainly by the country’s aim of following international recommendations set by the Financial Action Task Force (FATF).

Despite these regulatory initiatives, the country found itself re-included in the FATF list of “jurisdictions under increased monitoring” or “grey list” in 2021 and remains on this list at the time of writing. [1] As a result, there has been increased pressure to strengthen its AML/CFT programme, which includes beneficial ownership transparency (BOT). The Securities and Exchange Commission (SEC) is at the forefront of these initiatives due to its multiple roles as corporate regulator, company registry and AML/CFT supervising authority, with the SEC Chairperson as member of the Anti-Money Laundering Council (AMLC).

At the same time, the Philippines is also implementing BOT reforms as part of its commitment under the Extractive Industries Transparency Initiative (EITI). The Philippine Extractive Industries Transparency Initiative (PH-EITI) is the government-led multi-stakeholder initiative implementing the EITI Standard. It supports the implementation of BOT reforms in parallel with the SEC by ensuring extractive companies’ compliance with its reporting requirements. In 2021, the Philippines became a participating country in Opening Extractives (OE), a global five-year programme delivered by the EITI and Open Ownership (OO) to support compliance with EITI Requirement 2.5 on beneficial ownership (BO).

Using the Open Ownership Principles for effective beneficial ownership disclosure (OO Principles) and Requirement 2.5 of the EITI Standard, this report analyses the country’s current policy and legal environment with the aim of providing mid- to long-term recommendations to advance BOT reforms within and beyond extractives. For this reason, they are mainly targeted to the SEC. However, a separate document on short-term actions will be published later this year, setting out more specific recommendations for PH-EITI to support its efforts to strengthen compliance with Requirement 2.5.

The main recommendations in this report are for the Philippine government to:

• Enact a comprehensive law on BOT, aligned with international standards, that will contain a unified definition of BO; broaden the current scope to all types of corporate vehicles; and embody the policy considerations as well as purpose for processing and publishing certain BO data.
• Improve data collection to allow for more details, aligned with global best practice on the level of detail and disaggregation, especially where BO is held indirectly or ownership/control is exerted informally.
• Provide a single responsible agency, such as the SEC, with a clear legal mandate and adequate resources to establish, publish and maintain a central BO register.
• Establish a strong data verification mechanism, including providing public access to certain BO information that will enable interested parties to detect and report errors or discrepancies, thereby improving its accuracy.

The following recommendations are specifically for the extractive sector:

• Establish an enabling legal environment for the public disclosure of BO information for extractives, in accordance with Requirement 2.5 and the corrective actions from the 2021 EITI Validation of the Philippines, by legislative enactment or by executive policy amendment.
• Facilitate inter-agency cooperation to ensure data sharing and use across key agencies, including those that regulate and process extractive licensing and contracting, such as the Department of Environment and Natural Resources (DENR), the Department of Energy (DOE) and the Bureau of Internal Revenue.
• PH-EITI should coordinate with the SEC on the details of the BO disclosures that are expected from extractive companies under EITI Requirement 2.5, reflecting the same forms maintained by the SEC and used by PH-EITI for EITI reporting, e.g. information on politically exposed persons (PEPs).
• PH-EITI should maintain its BO extractive register in the interim, ensuring that the details of BO data required under EITI Requirement 2.5 are disclosed and updated, as well as expanded to include license applicants for: extractive projects; non-metallic and oil and gas companies; small-scale mining; extractive-industry service providers; and other segments of the extractive industries value chain.
• The EITI multi-stakeholder group (MSG) should coordinate with the SEC on BO data verification for extractive companies.
• The DENR and DOE should integrate BO data use as part of their licensing and contracting review process.
• Finally, the MSG should regularly assess the comprehensiveness of disclosures and report on extractive entities that fail to submit all or some BO information to improve BO disclosure compliance.

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