EITI and Asian Development Bank and are hosting a 2-day workshop in Manila on beneficial ownership (BOT), with 12 EITI countries from the region represented.
This blog pieces attempts to capture some of the key messages of the second day of the workshop.
Clearly the main focus is on countries in the region implementing the BO requirements of the 2016 EITI Standard. However, it also extended to the broader BO context as well as experiences from beyond the Asian EITI.
The event comprised of a series of panels. Some of the messages from panellists were as follows:
The first session focused on the definitions of politically exposed persons (PEPs)
Emanuel Yosep Bria, NRGI Indonesia
Once you are appointed a Minister you stop being in a position of authority in businesses, but it is unclear as to what happens to shareholdings.
Aye Myat Mon, Anti-Corruption Commission, Myanmar
Mon set out the existing definition of PEPs in Myanmar, which is Deputy Minister and above. But the EITI definition goes much further to look at all politicians, and is therefore challenging.
Arpine Sargsyan, Ministry of Justice, Armenia
Fighting against corruption is a significant challenge in Armenia, and there are many anti-corruption measures already in law.
Armenia has a draft law on BO, including a definition of PEP covering all positions which could be envisages as a PEP, being all those who have to submit to the register of interests, being senior politicians and their advisors and family members.
Batbayar Ochirbat, Transparency International, Mongolia
The definition of PEP covers all public servants at all levels, as well as those working for state owned enterprises, together with those with whom they share a common interest.
Jose Aquino, SEC Philippines(from the floor) made a comment was made from the floor relating to Philippines. Anyone taking up high office is required to divest assets at that point. However, there is little governance over whether there is some interest retained, and whether that investment is returned to the individual after they leave office.
Oliana Valigura, EITI but representing Ukraine
Ukraine has a very robust beneficial ownership disclosure regime, but this does not place a requirement on PEPs to divest investments. Politicians are not afraid to disclose that they have interests in private businesses.
The PEP regime applies to the President, Prime Minister, judges and certain other senior politicians, but not all MPs.
Oliana then demonstrated the Ukraine PEP register, showing the depth of data made public.
Cari Votava, World Bank (from the floor)
A key challenge is to understand whether an overseas BO is a PEP. It would be very helpful if jurisdictions were to publish a list of positions that qualify as PEPs, to assist other jurisdictions.
The second session was on verification.
Cari Votava, World Bank
There is no standard for good quality verification. Important to recognise the red flags in the sector and the subsector.
One aspect is capturing data about the submission of data, such as exactly who submitted BO data, when it was supplied.
The verification process should be based on a risk assessment, using a traditional heat map plot of risk against impact. This will allow the efforts on verification to be targeted on areas of highest potential overall exposure.
Sanctions:
Licencing – The sanction is simple, being to not issue the licence
Licenced – There need to be regulatory sanctions for non-compliance.
Steve Webster, BEIS, UK
To describe verification as a grey area is being too generous.
There are three elements:
- Data verification (sometimes called validation) – Ensuring that data is legitimate
- ID verification – Ensure the person, company or agent are who they say they are. This might involve copies of ID documents/passport/driving licence.
- Truth verification – Verifying that the statement is true.
There is no guarantee of truth, but these measures can provide an indication that someone is lying.
International best practice suggests some verification should be undertaken by:
- The State and Regulated Entities
- Others, including law enforcement, businesses and investors.
Sanction need to be appropriate to the offence and what the person stands to gain.
David Binks, ADB
Part of the ADB process for private sector engagement involves a multi-step process, including validation against publicly available resources and databases.
ADB looks at a 5% threshold for private companies and 10% for publicly listed companies.
The sanctions here are generally the contractual rights with the business. There are also sanctions of debarment in certain cases of misrepresentation.
Eldiyar Mukanov, Government of Kyrgyz Republic
There is a sanctions regime associated with non-reporting, which allows for a single failure to report, but if there is a failure after a second request, this can result in the revocation of licences.
There is also a regime requiring the divesting of investments by those taking political positions.
On the introduction of PEPs into the legislation there is consideration at the moment as to whether this should focus on listing interests, or divestment.
There is also a regime for dealing with false submission discovered at a later date. In this case there is no statute of limitations.
The same applies at the renewal stage, where if information is not supplied, renewal of licences can be denied.
Out of 2,500 licences, in the last 10 years Eldiyar has not seem any revoked licenses, and overall there have been a very small number. However there have been a small number of cases on the renewal of licences where companies have not provided information.
There were also parallel panel sessions. The first considered the role of investigative journalists and the second considered stakeholder engagement.
The panel on investigative journalists was a combination of journalists from the Philippines and Myanmar and civil society representatives from the same countries. It was chaired by Gulnara Toreliyeva, a journalist from the Kyrgyz Republic.
The themes that emerged from the discussion were:
- The need to make beneficial ownership relevant to ordinary people. It is a difficult concept for many to understand and to many communities is an unfamiliar concept
- Journalists have an important role to play in using beneficial ownership information and making it accessible to communities. Strategies for this include linking it to other issues such as health and environment that people care about. One intervention from the floor suggested that scandal was needed to demonstrate the relevance.
- Challenges included data availability, data access and timeliness. Data often needed collection from several sources and cross referencing, government agencies and companies may be reluctant to provide information and even where available, the cost of accessing it may be prohibitive to communities and organisations with limited budgets. The Philippines example was cited where there is charge for accessing company data on the SEC website.
The second panel on stakeholder engagement was moderated by Eddie Rich and consisted of a CSO representative, a government representative and a consultant for OGP.
The discussion focussed on using beneficial ownership in real life situations. Examples given included checking whether PEPs in the Philippines owned stakes in extractive companies (which is illegal) and for investigating transfer pricing. The limited availability of publicly available beneficial ownership in many countries remains a limiting factor. For example, in Indonesia which has legislated for the collection of such data but has to yet to make it public.
Eddie Rich, EITI
Eddie gave a history of EITI BO, including highlighting the progress made since the global BO conference in Jakarta in 2017. There has been significant progress over those three years.
Maria Teresa S Habitan – Government of Philippines
The current status of EITI implementation, and in particular on BO was set out. This included a description of the online reporting tool for EITI data, and the move to paperless information collection.
Everyone was encouraged to push towards the EITI 2020 deadline on BO.
