Lessons for an accountable transition: Leveraging beneficial ownership information for natural resource governance
Actionable lessons from using beneficial ownership information for natural resource governance
Experiences in the extractive sector have laid bare the detrimental impacts of a lack of solid accountability mechanisms along the value chain. However, advances in the application of BOT and other accountability measures, for example in the countries involved in the Opening Extractives programme, have also generated valuable lessons. Now is a critical time to ensure these lessons inform integrity and accountability measures in other strategic sectors support accountable operations and processes as part of the energy transition.
Government actors implementing beneficial ownership disclosure
- There are a range of reasons why governments may wish to make the ultimate ownership of companies and other corporate vehicles more transparent. Grounding reforms in national policy priorities and goals that BOT is intended to support increases the likelihood that reforms will be effective. High exposure to fraud, corruption and other forms of abuse and crime in the extractive industries has led several countries to prioritise this sector in their corporate transparency agenda.
- Global standards, guidance and evidence can inform BOT reforms. However, these ultimately require a comprehensive legislative framework at the national level that reflects policy aims and is anchored in the local context. Policy and legislative reforms ensure the disclosure of information on beneficial ownership does not rely on voluntary compliance by companies.
- Consulting with current and future users of information on beneficial owners is essential. It creates an understanding of their needs and ensures that they can be met through the laws, regulations and data collection, storage and publication systems which are designed and enacted. Users – including government agencies, companies, investigative journalists and civil society – help tackle fraud, crime, corruption and other integrity risks.
- Defining clear policy aims for a reform will help identify the full range of ways in which beneficial ownership data is expected to be used to reach these aims and how this can be incorporated into new and existing processes. Reflecting on the types of questions that end users will aim to answer with information on beneficial owners can help implementers understand user needs and guide policy development, including for natural resource governance.
- Making data interoperable ensures that it can be readily used with other sources and integrated into different systems and processes, including to support natural resource governance. [96] Facilitating connections between beneficial ownership datasets and other types of data and processes is central to making data usable. For example, collecting reliable identifiers in beneficial ownership disclosures enables users to match companies and individuals between datasets. [97] The Beneficial Ownership Data Standard is a framework for publishing structured data about beneficial ownership that has interoperability at its core. [98]
Government actors using beneficial ownership information for accountability
- Information on beneficial ownership can be used at several stages of the extractives value chain, from the initial award and transfer of licenses and contracts, to the actual extraction, transformation and sale of resources, to the allocation of the financial resources generated by these activities.
- Setting out legislative requirements for clear and transparent licensing and contracting processes can meet a broad range of objectives, such as detecting corruption and preventing speculation, collusion and bid-rigging. Government agencies in charge of licensing and contracting can use beneficial ownership data to ensure that license applicants satisfy the criteria where these relate to ownership.
- Whether an agency overseeing licensing and contracting uses information from a central register, collects it, or both, it will need access to up-to-date data and, ideally, historical records. The minimum information needed is a declaration of all beneficial owners for all license applicants. When agencies adopt a prevention approach and look for patterns of hidden and unknown risk factors, they will mostly require access to multiple records, either through complete register access and flexible search functionalities, or by having bulk datasets or data available directly via an application programming interface.
- Beneficial ownership information can also help public procurement agencies select suppliers for public contracts funded by revenues generated from extractive activities, ensuring that only skilled professionals and authorised companies are granted public contracts, which is essential to providing quality services for citizens.
- Government data use often requires interagency cooperation and buy-in. Mining licensing agencies and other government data users can actively participate in the implementation of BOT and data sharing. Those with responsibilities for license screening should not consider themselves alone in the effort to keep corruption, fraud and other transgressions out of the licensing and other processes.
- Building capacity on the use of beneficial ownership data among officials is essential, as it will enable data to be used effectively in preventing risks and raising alerts when red flags are detected.
Private companies and state-owned enterprises
- Responsible staff of SOEs can use beneficial ownership information to reduce corruption risks when subcontracting services. By disclosing information on their beneficial ownership, SOEs can help identify potential conflicts of interest, including vested interests which may capture policy processes related to the energy transition.
- Despite their major role in the extractive sector, commodity-trading companies are often placed under lighter scrutiny. Requiring beneficial ownership information as part of commodity-trading activities is critical to ensuring transparency in this potentially lucrative business.
- To comply with legal and regulatory obligations, and at the same time prevent possible association with corrupt actors and criminals, businesses need to carry out thorough due diligence on suppliers, subcontractors, partners and investors. Beneficial ownership information is a valuable resource in this process, and its use can also be integrated into ESG commitments.
- The benefits of ownership transparency of state-owned enterprises and the need to carry out due diligence on various types of entities along the value chain, such as joint venture partners and commodity-trading intermediaries, illustrates the importance for governments to develop legislative frameworks for beneficial ownership disclosure which ensure comprehensive coverage of the widest range of corporate vehicles, including those considered higher risk or most strategic from a revenue-generation perspective.
International organisations
- The transnational nature of ownership networks makes combining data from different jurisdictions essential to gaining full visibility of ownership structures. International organisations have a role to play in pushing for the standardisation of beneficial ownership information to support its use. International institutions can also divulge existing lessons from BOT implementation to accelerate the harmonisation of solid domestic policy, legal frameworks and technology solutions and create favourable conditions to improve accountability in natural resource governance.
- Few of the leading standards for responsible business practices in the renewable energy sector directly or thoroughly address transparency, anti-corruption or governance issues. International actors are increasingly monitoring and assessing progress in this regard, and they can support higher standards on BOT for renewables, building on lessons learned in the extractive sector.
Media and civil society organisations
- Media and civil society investigations have been critical to exposing the use of anonymous corporate vehicles to obfuscate the proceeds of corruption and financial crime as well as holding both companies and governments to account for their management of large-scale activities and high volumes of revenue in the extractive sector.
- Securing civil society’s access to beneficial ownership information and ensuring their needs as users of the information are met is fundamental to natural resource governance. The most efficient means of allowing access to data users outside of government is through the routine publication of information for the extractive sector or whole of the economy.
- Some CSOs and journalists have more expertise than others in using and combining data analytics and investigative journalism to promote accountable natural resource development. Those with more experience have a role to play in creating spaces, connections and accessible tools for sharing knowledge and building teams to carry out research and investigative projects.
- Actors external to government also have a role to play in collating and sharing lessons learned across jurisdictions. For instance, opportunities for peer exchange among agencies can yield new or renewed commitments and help leapfrog technical capacity.
Footnotes
[96] Jack Lord and Tymon Kiepe, Open Ownership (2022), Structured and interoperable beneficial ownership data. Retrieved from: https://www.openownership.org/en/publications/structured-and-interoperable-beneficial-ownership-data/.
[97] Kadie Armstrong and Stephen Abbott Pugh, EITI and Open Ownership (2023), Using reliable identifiers for corporate vehicles in beneficial ownership data. Retrieved from: https://www.openownership.org/en/publications/using-reliable-identifiers-for-corporate-vehicles-in-beneficial-ownership-data/.
[98] For more information, see: Open Ownership (no date), “Beneficial Ownership Data Standard”. Retrieved from: https://www.openownership.org/en/topics/beneficial-ownership-data-standard/.