Transparency when it comes to Beneficial Ownership:

Introduction:

Beneficial Ownership is a vital check against corruption in society generally -it is good for companies and the countries where they operate. It is a money saver – as it results in small to medium enterprises spending less on due diligence processes when they investigate potential business partners, requiring merely heightened scrutiny, rather than a deep delve into individuals and/or entities. Transparency regarding Beneficial Ownership provides clarity on who controls a company, and who the partners are. According to the World Bank,[1] roughly 70 percent?? of the biggest corruption cases (1980-2010) involved anonymous companies.

?

Why Beneficial Ownership:

By providing for Beneficial Ownership, it allows for governments to develop legal policies and data-collection systems, and results in sector reform. The disclosure of beneficial ownership requires the establishment of rules bringing to the forefront what constitutes an unacceptable self-dealing and/or corruption,? found in both the public and private sector. The problem which arises when these rules are in place is that the monitoring and enforcement divisions lack. In turn, this means that extra resources need to be allocated to the monitoring and enforcement wings of the cause. [2]

?

Future Considerations:

What needs to be considered is how governments can strengthen their processes to take on basic corruption risks posed by troublesome Beneficial Ownership. Many countries have regulations simply stating that officials are not to engage in bribery or self-dealing transactions. This is not sufficient -simply stating that an act should not be partaken in, is insufficient. Clear sanctions, prohibitions, and consequences must be spelled out, AND enforced. Examples of such sanctions include termination of official duties, removal of designations, or other tangible repercussions – which may include legal penalties such as fines or imprisonment. There must be clear guidelines to follow when violations have occurred, and checks for when policies on monitoring potential conflicts of interest do exist. Once entities and governments know what is deemed unacceptable self-dealing or corruption, as well as what the consequences will be, solutions can be sought when such problems arise and are identified.

?

It is important to note that Beneficial Ownerships interests does not necessarily involve the exchange of money. Any other type of benefit (including beneficial ownership) to a public official or third party who intervenes in any manner in any actions in the licensing or contracting procedures in respect of rights or interests, with the intention that that party carries out? or refrains from carrying our an action connected to their obligations or those of another public figure, in order to obtain/maintain an advantage for a natural person or an entity, whether or not money is actually received or benefits are obtained, also constitutes corruption.

?

It is crucial to keep in mind that the mere offer to take or receive improper benefits should be penalized, regardless of willingness of the official(s) or results obtained. This eliminates the mere perception of impropriety and reduces influence or exercise of political power over another person/public official for the purpose of obtaining a benefit or advantage. Authorities (which should include law enforcement agencies), may be required to step in to ensure that the penalty phase following the identification and fact-finding stage, can be enforced.

?

Recommendations:[3]

a)????? Reinforcing underlying legal and regulatory requirements for disclosure of different ownership structures is fundamental to effectuate transparency, thereby strengthening disclosure requirements.

b)???? Linking ownership information with other policy areas can aid in tracking money and assets across sectors and jurisdictions.

c)????? Verification systems are required for Beneficial Ownership data to be registered. This will assist in ensuring accuracy and usability of beneficial ownership data.

d)???? Encourage citizen engagement in monitoring channels of accountability. The use of formal and informal channels of monitoring enabling all citizens to track ownership information can aid in uncovering corruption networks.

?

Conclusion:

To reduce illicit activities and prioritize the fight against corruption, modern ownership structures need to be considered.? Additionally, accessibility of date regarding ownership structures, needs to be revised.[4] By keeping certain information private, illegitimate actors have taken advantage of anonymity to further their corruption – by hiding transactions, moving money between entities, banks, currencies, or countries.

?

Implementation of registers recording beneficial ownership interests, and entities enforcing compliance in these areas, should start taking priority. There needs to be a global effort to strengthen efficacy and cooperation in both the public and private sectors. By levelling the playing field for legitimate stakeholders through compliance strategies and thereby protecting against corruption risks, steps are being taken in the rights direction. Registers can uncover hidden connections between individuals, companies and politically connected cadres, thereby enabling law enforcement to more effectively combat fraud, detect questionable transactions and prosecute illicit dealings.

?

?

?

?

[1] The Puppet Masters How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It – Emile van der Does de Willebois, et al.? https://openknowledge.worldbank.org/server/api/core/bitstreams/e80259c9-d3ca-5d16-adef-fec02a3989dd/content - Accessed 10/31/2023

[2] Beneficial Ownership Screening: Practical Measures to Reduce Corruption Risks in Extractives Licensing – Erica Westenberg & Aaron Sayne. https://resourcegovernance.org/sites/default/files/documents/beneficial-ownership-screening_0.pdf -?? Accessed 10/31/2023.

[3] Supra n.1

[4] Beneficial Ownership Transparency is Almost Succeeding. The Private Sector Can Help. – Abe Collier, et al. https://acgc.cipe.org/business-of-integrity-blog/beneficial-ownership-transparency-is-almost-succeeding-the-private-sector-can-help/ - Accessed 10/31/2023