Using beneficial ownership data for national security

Conclusion

The December 2020 US commitment to implementing a central BO register has put the spotlight on how BOT can contribute to national security. Mostly, this covers the use of BO data in known policy areas, rather than new ones.

BO data is essential in order to know with whom one is doing business. Anonymously owned shell companies are a significant loophole in legislation protecting national security, and can make countries complicit in illegal activities outside their jurisdiction that negatively impact their national security. These loopholes can be exploited by hostile states as part of foreign policy to undermine national security, or by actors pursuing financial incentives, for whom undermining national security is not the aim but whose actions undermine it nonetheless.

This briefing shows that the issue of national security crosscuts a number of different policy areas where the use of BO information is relevant. It demonstrates that in order for BOT to address the loopholes, reliable and usable BO data needs to be made available in a timely manner to and used by a range of government and non-government actors. The most effective way to do this is through implementing central registers. In many instances, making the data available to the public can have further benefits.[105] For many of the policy areas, foreign state ownership of companies is relevant and should therefore be captured as part of BO disclosures in a standardised way.[106] All relevant entities should be included within the scope of disclosure.[107]

The briefing has also demonstrated that BO data is most valuable when combined with other data to enforce legislation, for instance, with government licensing data or lobbyist data. In order to do so efficiently, and in order to build in automated checks that can raise red flags, BO data should be made available as structured and interoperable data.[108] Beyond specific use cases, BOT provides visibility and knowledge of who is operating in an economy and financial system, which is a fundamental piece of information for knowing how best to protect it.

The OO Principles provide a framework for implementing comprehensive BOT reforms, in line with the recommendations set out in this briefing. They seek to generate actionable and usable data across the widest range of policy applications of BO data. Effective disclosure needs high quality, reliable data to maximise usability for all potential users and to minimise loopholes.[109]