Who benefits? How company ownership data is used to detect and prevent corruption

Overview

While slowing economic growth, rapid societal changes and shifting environmental and energy outlooks are causing uncertainty, tensions between societies and their governments are increasing.[1] In this context, entrenched political corruption and kleptocracy, enabled by the anonymous ownership of companies, can undermine democratic governance and hamper domestic and international efforts to tackle the significant challenges societies are facing.

Governments and civil society recognise the importance of transparency of the individuals who ultimately own and benefit from companies – their beneficial owners – to tackle these problems. Over 120 jurisdictions have committed to reforms for better visibility of company ownership, yet fewer than half of these have implemented their commitments.[2] The extractive sector is among the highest-risk industries for corruption and has been a key focus for beneficial ownership transparency, spearheaded by the Extractive Industries Transparency Initiative (EITI).

This brief demonstrates the potential of company ownership data to challenge those seeking to abuse their positions for personal gain by illustrating how data on beneficial ownership helps prevent and detect corruption, particularly where this data is available through public registers. The brief’s focus is on political or grand corruption, where data from beneficial ownership registers is being used across jurisdictions to:

1. Investigate corruption and follow the money: anonymously owned companies can present a dead end in corruption investigations, and information on company ownership can help financial investigative units, law enforcement and journalists uncover conflicts of interest that may otherwise remain hidden.
2. Reduce corruption risks through informed decision making: access to information on real company owners can raise red flags that escape more superficial checks, resulting in procurement, licensing and due diligence decisions that are better informed by visibility of potential risks.
3. Analyse data using novel approaches to deliver anti-corruption insights and impact: analyses using beneficial ownership data are a means to improve understanding of patterns and behaviours that may point to corrupt practices. They offer law enforcement, civil society and governments new insights into how corrupt actors navigate and exploit financial and economic systems and may help trigger investigations.

Rooting out corruption in the extractive sector can support some of the most pressing imperatives for governments of resource-rich countries, including improvements in resource governance, domestic resource mobilisation and national security. The cases outlined in this brief demonstrate that public beneficial ownership data has the potential to play a critical role in reducing corruption.

To realise this potential, governments should work with businesses, civil society, standards-setting bodies and international organisations towards the goal of building beneficial ownership registers that are public, meet user needs and are sustainable. Action is also required to invest in innovations and raise capacity to enable the use of data. Embedding data use into existing and new processes – from supplier due diligence to policies on the energy transition and the governance of critical minerals – will make a significant difference to the ability of all stakeholders to follow the money and reduce corruption risks.

Next page: Global anti-corruption efforts using beneficial ownership data