Last Thursday in Kiev, the global transparency initiative which promotes good governance of natural resources – the Extractive Industries Transparency Initiative (EITI) – agreed to make beneficial ownership transparency an obligation on all 49 member countries. This is an important step forward towards shining a light on who owns and controls companies so that they can no longer be used anonymously against the public good.
Global Witness’ investigative work continues to reveal more and more cases of how anonymous companies are used to facilitate corruption of natural resources in key EITI countries (OPL 245, Congo Secret Sales). In our recent report ‘How to Lose $4 Billion’ we reveal how oil and mining assets worth a staggering $4bn have been allocated to companies whose ownership is obscure in four African countries – three of which are members of the EITI.
Natural resources are crucial to the development and prosperity of resource rich countries. Citizens own these resources and have a right to know who controls the companies that extract them and who benefits from the revenues raised. Without this transparency there is a lack of trust between governments, citizens and companies. Revealing the ownership of extractive companies helps prevent conflicts of interest that enable corrupt officials to siphon off cash that could pay for schools, hospitals and skilling people up in countries that badly need it.
In Kiev last week, the EITI International Board agreed that all 49 EITI countries will have to request companies, who bid for, operate in and invest in the oil, gas and mining sectors, to disclose who their real owners are. Companies who do not reveal their owners will be named. Countries will also need to agree a roadmap indicating time lines for when citizens will get information on the companies’ real owners and it will be recommended for them to introduce registers of the beneficial owners which are accessible to the public. The Board still needs to agree the exact timeframe for when this requirement will apply.
To have a real impact beneficial ownership transparency cannot be pushed down the line; it needs to start soon to ensure citizens know who is getting the lucrative rights to their natural resources and to ensure companies know who they are doing business with.
During the EITI International Board meeting in Kiev from 9th – 10th December, the Board agreed to the following:
- By (date to be agreed) national EITI multi stakeholder groups (MSGs) which are essentially an EITI country’s decision making body, will need to publish a roadmap for disclosing beneficial ownership information.
- A country’s EITI report should also provide details of its government policy, any relevant legal provisions, actual disclosure practices and any reforms that are planned or underway.
- By (date to be agreed) companies that bid for, operate or invest in extractive assets must disclose their beneficial owners and a range of identifying details (such as names, nationality, country of residence etc).
- Disclosure will include any politically exposed persons - a technical term for officials who have access to state funds and exercise state authority so are at risk of corruption, both nationally and overseas.
- The national MSG will agree a way for companies to guarantee the accuracy of the information they provide.
- Companies should also disclose their legal owners i.e. immediate shareholders and the share of ownership for each beneficial owner and immediate shareholder.
- A definition of a ‘beneficial owner’ should be in line with international norms.
- Listed companies will need to disclose the name of the stock exchange they are listed on and provide a link to their stock exchange filings.
- Companies that do not disclose will be named.
- When companies are in a joint venture, all companies that are not listed must disclose their beneficial owners.
- It is recommended for EITI countries to maintain a public register of the beneficial owners of extractive companies.
A decision is still pending on when countries will need to complete their roadmap and when beneficial ownership transparency will become a requirement on all 49 EITI countries.