Beneficial ownership has been found as a tool to combat illicit funding and illicit financial flows. This is achieved through the provision of information on the companies/legal entities, ownership and control.
Lack of beneficial ownership has been found to encourage tax evasion, money laundering and corruption. Beneficial ownership thus contains the information of a beneficial owner who has the ultimate right of a share of a company or legal entity.
Why is Beneficial ownership important?
Extractive Industries Transparency Initiative (EITI) defined beneficial ownership as information on a beneficial owner regarding a company who directly or indirectly owns or controls the corporate entity.
The term beneficial owner entails the disclosing of listing details of the company to the public – who directly or indirectly own and control the company.
Basically, beneficial ownership reveals how companies and legal ownerships are owned and controlled by their beneficial owners. The beneficial ownership makes sure legal persons and legal arrangements are sufficiently transparent by ensuring basic and up-to-date information about the company is available to the public.
A review of cases by the Stolen Assets Recovery Initiative of the World bank reveals most of the cases of corruption globally are perpetrated using anonymous companies. Thus, Beneficial ownership is aimed at preventing companies from operating in secrecy, usage of companies for money laundering and other illegal activities which in most cases are financial.
The Global data barometer, beneficial ownership data, helps a country in improving trust in the government and supports sustainable economics and building market confidence.
Beneficial ownership is also used to seek due process, most especially in the public procurement process. Beneficial ownership is used to check for multiple and linked ownership of companies to government officials based on the public procurement act.
What does Beneficial look like?
To effectively reveal those in control of the companies, beneficial ownership data should have some basic information. This information includes details of individual owners, a breakdown of shared holding by owners, the voting rights of shareholders, rules of board membership, and rules of other entities.
The beneficial ownership also has a reporting standard, which states how beneficial ownership data should be presented. It also comprises a data model that helps to identify and represent the content of beneficial ownership.
Fresh breath from Nigeria
To drive an open platform for beneficial ownership transparency, Anfani, an innovative social platform is defying odds by helping Nigerian and the international community connects dots in the budget, contract, audit data and corporate sector actors.
This platform, which is built on open data and integrated with current social media tools, allows international local and international organisations including the media, NGOs and anticorruption bodies to easily access the information without having to go through bureaucratic legal procedures.
Has Beneficial Ownership data promoted Transparency in the countries where they exist?
Currently,119 countries across the world are committed to beneficial ownership. Also, bodies like the United Nations, World Bank, International Monetary Fund, G20, G7 and the Financial Action Task Force have shown their support towards implementing beneficial ownership to promote transparency and demanding accountability.
However, only 44 countries out of these 119 countries have implemented beneficial ownership. Thus, for most countries, beneficial ownership data is not available to the public.
The use and implementation of beneficial ownership data is limited in Africa and Asia but more prevalent and improved in Europe. The absence of this data has made it impossible to track contract award details to comply with approved standards.
Beneficial ownership data has improved transparency in the public domain. A comparison of data from the corruption perception index shows that of the top 10 countries with high transparency, most of them have active beneficial ownership data.
Transparency ranking revealed most countries in Europe and some in Asia as the countries with the highest corruption index. Further findings also show that most countries with the highest corruption perception index are in either other identified with beneficial ownership.
Out of the 10 countries with the highest corruption index, only New Zealand has no beneficial ownership register and Switzerland proposed to have a beneficial ownership register by June 2023. This further confirms that beneficial ownership increases and enables transparency.
However, some countries that have beneficial ownership registers have barriers to accessing and using the beneficial ownership data. Some of these barriers include geographical restrictions to accessing beneficial ownership and access restricted to nationals and citizens of the country, availability of registers without access to the public, and quality of beneficial ownership.
Despite the barriers, beneficial ownership data is a requirement of financial crime, as it helps counteract money laundering, tax evasion, and other financial crimes.