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June 22, 2020

4 Simple Steps to Implement Beneficial Ownership Under COVID-19

Covid
Posted by Thom Townsend[1]

At least ten countries, including Gabon, Nigeria and Pakistan have committed to the IMF in the context of the coronavirus response to disclose the beneficial owners of contracts awarded to companies. The task now is to ensure these commitments are implemented effectively.

As governments publish their 2020 growth figures, clearly COVID-19 will send almost all G20 countries into recession. Current estimates for the total cost of the pandemic globally are between $5.8 and $8.8 trillion (or 6.4-9.7% of global GDP), according to the Asian Development Bank. Over $7 trillion has been committed in fiscal responses globally to support economic growth.[2] Companies will be the ultimate recipients of much of this unprecedented commitment.

Knowing who ultimately owns companies (their beneficial owners) is a key piece of data that allows governments and citizens to check that money is going where intended. In many jurisdictions, this information is sorely lacking. The recent message of the IMF’s Managing Director, Kristalina Georgieva, to governments receiving $1 trillion in COVID-19 assistance was: “Spend what you can but keep the receipts.”

This strong message is welcome, but in many jurisdictions it is not a given that receipts are generated in the first place. Greater efforts are needed to ensure governments implement solid systems to collect the necessary information, including beneficial ownership data. International financial institutions have a role to play in supporting this and monitoring progress.

OpenOwnership has spent the past four years gathering the experience and evidence to support governments collect and publish data on beneficial ownership. We are already providing direct technical assistance to a number of the countries with IMF commitments either directly or through our partnerships with the  Open Government Partnership and the Extractive Industries Transparency Initiative. In the cases of the Kyrgyz Republic and Nigeria, we have supported implementation of beneficial ownership disclosure in extractive industries and reviewed draft regulations and disclosure forms.

From experience, we know that practices look different in each country. To be successful implementation must be tailored to local context. In recent years calls and commitments to implement beneficial ownership transparency have grown to over 80 countries. We appreciate the steps that governments have to go through to achieve their goals, after the hard thinking has been done.

In the current crisis – where time is of the essence – the pathways to disclosing information on beneficial ownership may be different from those taken previously. Legal, technical and resource constraints need to be balanced against the urgency of disclosing information quickly. The resulting data may be less comprehensive than ideally required for anti-corruption efforts and proper oversight. However, given the elevated corruption risks created by the coronavirus pandemic, it is imperative that beneficial ownership data, even if not in its ideal form, is recorded and used. 

OpenOwnership exists to make the process of collecting and disclosing data on beneficial ownership as quick, easy and effective for governments as possible. The OpenOwnership team recommends the following four steps to facilitate this process. 

Step 1: Consider the current setup: Undertake a rapid assessment of the existing legal and regulatory framework governing the collection of data in key areas such as procurement. Consider whether and how beneficial ownership is defined, as well as the technical capacity and systems required to collect the necessary data. Identify where beneficial ownership information can be collected within existing frameworks, or how it could be swiftly incorporated by amending regulations (for example, those regulating emergency procurement). OpenOwnership has prepared several assessment tools that can be used to analyze the state of play.

Step 2: Effectively collect beneficial ownership information, including clear guidance and definitions for submitters: OpenOwnership has developed sample forms that identify the key fields for collecting such data. Once collected, the Beneficial Ownership Data Standard is the fastest and easiest way to structure data in a usable and shareable format. However, where this is not possible, agencies can instead collect beneficial ownership data by amending existing digital or paper forms. In contexts where beneficial ownership disclosure is deemed to cause potential delays in supporting companies in need of immediate help, the requirement deadline for publishing ownership data could be set at a later date, ensuring the “receipts” are still kept for post hoc accountability.

Step 3: Verify the data: Verification is critical for generating useful and reliable beneficial ownership data. While setting up comprehensive verification systems rapidly may be difficult, immediate steps can be taken to improve accuracy. Where data is collected digitally, conformity checks can be built into the system. Whatever method is used to collect information, requiring supporting evidence (e.g., passport scans) will give officials valuable information to inform decision-making as well as for post hoc investigations where required.

Step 4: Publish the information for public scrutiny: Publishing data will enable many people and organizations to use the data and follow the money from government senders to their ultimate recipients. Once Steps 1 to 3 are completed, key fields can be made publicly available, either through a register, an existing online portal, or as CSV files on a government website. Readily accessible information will make it easy for civil society groups to monitor contract beneficiaries or for law enforcement officers or journalists to carry out investigations.

In proposing these steps, we acknowledge that countries start from and operate in different contexts and are subject to widely varying capacity and system constraints. OpenOwnership’s country and technical teams are available to answer questions at support@openownership.org.

This article is part of a series related to the Coronavirus Crisis. All of our articles covering the topic can be found on our PFM Blog Coronavirus Articles page.

 

[1]  Executive Director, OpenOwnership.

[2]  Data from COVID-19 Economic Stimulus Index (CESI) (www.ceyhunelgin.com) and World Bank data (https://data.worldbank.org/indicator/NY.GDP.MKTP.CD)

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.

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