At the start of December 2018, OpenOwnership was in Kiev starting our technical assistance to the Government of Ukraine. In October, the country publicly committed to become the first country to implement the Beneficial Ownership Data Standard (BODS), working with OpenOwnership through our Pilot Program.
At the opening event, Deputy First Minister Olena Sukmanova highlighted the importance of beneficial ownership transparency to overall anti-corruption reforms in Ukraine, declaring that “these reforms are revolutionary . . . nothing will stop us any more.”
This partnership is a landmark for OpenOwnership’s vision of useful and usable beneficial ownership data. It is the first time the Standard will be implemented. By using the Standard, Ukraine will be able to publish higher quality beneficial ownership data, and it will be far easier to link this internationally through the OpenOwnership Register, making it more useful for people around the world. Through the process, we will have many opportunities to learn that will help us support other countries to publish high quality beneficial ownership data.
The work builds on OpenOwnership’s review and recommendations for improving beneficial ownership transparency in the country, developed after we spent time scoping out the opportunity at the start of the year, and we were thrilled to get into the technical and policy details that will make it happen!
Ukraine became the second country in the world after the United Kingdom to implement a public register of the beneficial owners of corporate entities registered in the country. Laws were passed in 2014 and 2015, and work has been underway ever since.
Throughout the week, OpenOwnership’s tech and policy experts met with Ministry of Justice officials, the technical team responsible for Ukraine’s beneficial ownership register, and users of the data including the Financial Intelligence Unit and civil society organisations.
We spent two days with the technical staff who are developing the new software system that will allow Ukraine to store and publish beneficial ownership declarations as structured data. Working through their database field by field, we mapped the data points they plan to collect to those recommended in BODS. From this we were able to identify which aspects need to change to improve the accuracy and usability of the beneficial ownership information Ukraine publishes.
We identified some technical changes that would increase usability of the data. The Ukrainian beneficial ownership register is an addition to the existing state register for companies. A system designed to describe companies, rather than people or ownership relationships has inevitable limitations. But, by making the conceptual shift to a register that treats people and ownership relationships as of equal importance, new kinds of verification and analysis become possible. For example, when a beneficial owner is entered into the system, their details could be checked and, if a match is found, any existing records retrieved and linked. The register could also show all of the companies beneficially owned by a single natural person, allowing investigators to identify patterns of ownership. We also discussed solutions to issues caused by transliteration (for example when information is changed from Cyrillic to Latin characters). The unpredictable and undocumented transformation of text from one alphabet to another introduces significant potential for error in beneficial ownership registers, and allows dishonest actors to disguise misinformation as mistakes, as well as making it harder to link beneficial ownership information transnationally. In the future we will be sharing guidance on how to address this issue.
Other changes may require amendments to the law to authorise Ukraine to collect the more granular data required by the Standard. One notable example is the type of ownership held by a beneficial owner over a legal entity. Currently, Ukraine’s definition of beneficial ownership specifies some mechanisms through which beneficial ownership can be held, including voting rights and holding shares. However the definition is not comprehensive and the software system does not capture this information as structured and machine-readable data. Understanding the type of beneficial ownership held by an individual can be important and useful. For example, law enforcement investigating suspicious activity may want to understand what rights an individual has over a particular company.
As well as identifying areas for improvement, we found several ways in which Ukraine’s new software will enable much more useful beneficial ownership data to be published. The system is set to collect exact percentage of ownership (above the 25% threshold for beneficial ownership specified in law). As long as this is published publicly as open data, this will be an improvement on, for example, the UK’s beneficial ownership register, which only collects and publishes percentage ownership in bands (eg. 25-50%). OpenOwnership is noting these highlights and using them to inform recommendations for our work in other jurisdictions.
The week ended with an official opening of the project by the Deputy First Minister and Deputy Minister for State Registration, followed by a day discussing the legal framework for beneficial ownership transparency and the broader changes to Ukraine’s regime that are required to make beneficial ownership data genuinely useful. Verification and improving compliance were key themes, and we discussed technical and policy solutions to verify data, and the need to strengthen sanctions for those that fail to submit, or submit incorrect information.
So what’s next?
We’ll be supporting Ukraine to implement the changes - both technical and policy - that we identified, and are working towards the first exports of Ukrainian data in BODS format by February 2019. We’ll be making sure we learn everything we can from our work with Ukraine, and include it in information we publish to guide other countries implementing beneficial ownership regimes.
It’s clear that implementing the Beneficial Ownership Data Standard will bring real benefits to Ukraine’s beneficial ownership regime, and help drive improvements in other countries - we’re looking forward to continuing to work with our partners in Ukraine!