Understanding Beneficial Ownership Requirements in EITI Standards
The EITI Standard requires countries to disclose the beneficial ownership information of oil, gas, and mining companies by January 2020. This includes details of the beneficial owner's identity, nationality, and any politically exposed status. Maintaining a public register of beneficial owners is recommended, with information to be included in EITI reports. Lack of clear definitions for beneficial ownership poses key legal concerns.
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#EITIOslo2020 10 14 February EITI Oslo Week EITI Oslo Week
#EITIOslo2020 12 February 2020 Beneficial Ownership: Beneficial Ownership: Lessons Learned from Tackling Technical Issues Lessons Learned from Tackling Technical Issues EITI International Secretariat: Andrew Irvine & Oliana Valigura EITI International Secretariat: Andrew Irvine & Oliana Valigura
Agenda Agenda Brief overview of Beneficial Ownership (BO) Requirement Key legal concerns Key technical issues Verifying BO data Developing BO registers (Thom Townsend, OpenOwnership) Country examples: Armenia (Lilia Shushanyan) Others Questions & Answers Questions & Answers Calls for Support from the EITI Calls for Support from the EITI International Secretariat International Secretariat
Beneficial Ownership Requirement Beneficial Ownership Requirement Understanding who profits: Beneficial ownership Understanding who profits: Beneficial ownership The EITI Standard requires: By 1 January 2020, countries By 1 January 2020, countries should request, and companies disclose, the nature of should request, and companies disclose, the nature of beneficial ownership of oil, gas and mining companies. beneficial ownership of oil, gas and mining companies. Covers all oil, gas and mining companies that apply for, or hold a participating interest in an exploration or production oil, gas or mining license or contract. Requirement 2.5. Beneficial ownership.
Beneficial Ownership Requirement Beneficial Ownership Requirement Information should include the identity of the beneficial owner, including the name, the beneficial owner, including the name, nationality and country of residence nationality and country of residence, and whether the owner is politically exposed Could also include date of birth, national identity number, residential address, etc. Implementing countries are recommended to maintain a public register register of beneficial owners. The information must at least be published in EITI reports. identity of Who is a beneficial owner? A beneficial owner in respect of a company means the natural person(s) who directly or indirectly ultimately owns or controls the corporate entity. EITI Standard 2.5.f.i. politically exposed. public
Key Legal Concerns Key Legal Concerns The lack of appropriate beneficial ownership definitions has been identified as a key challenge in obtaining useful beneficial ownership data in EITI countries. Beneficial Ownership Definition Beneficial Ownership Definition EITI Standard requires each MSG to agree an appropriate definition of the term beneficial owner, referring to the natural person(s) who directly or indirectly ultimately owns or controls the corporate entity. Req. 2.5.f.ii. The definition should consider international norms and relevant national laws and should include ownership thresholds.
Details of BO Information Details of BO Information Name Name used, pseudonym Key Legal Concerns Key Legal Concerns First names Last name Patronymic Beneficial Ownership Definition Beneficial Ownership Definition Shareholder / share capital / ownership interest / interest in mining title Voting rights or ability to assign voting rights Right to benefit / receipt of economic interest Ability to hire and fire company officers Right to decide Legal representative of entity On whose behalf transaction is conducted Date of birth Place of birth Country of residence Nationality/citizenship Personal address of beneficial owner Service/registered address Foreign address Nature/means of control Nature of ownership, relationship between owner and company Particulars of the person in whose name the share is registered Date of becoming a beneficial owner Information on identity documents, Company/trade name Corporate/legal form and identification Information about executives
Key Legal Concerns Key Legal Concerns Control Control Direct and/or indirect Politically Exposed Persons (PEPs) Politically Exposed Persons (PEPs) The EITI Standard states the definition of beneficial ownership should specify reporting obligations for PEPs. Req. 2.5.f.i. Thresholds Thresholds % of share/capital ownership % of voting rights % of profit-sharing/distributed net income
Beneficial Ownership Verification: Beneficial Ownership Verification: What the EITI Standard provides: What the EITI Standard provides: The multi-stakeholder group should assess any existing mechanisms for assuring the reliability of beneficial ownership information assuring the reliability of beneficial ownership information and agree an approach for corporate entities to assure the accuracy of beneficial ownership information they provide. This could include requiring companies to attest the beneficial ownership declaration form attest the beneficial ownership declaration form through sign-off by a member of the senior management team or senior legal counsel, or submit supporting documentation submit supporting documentation. Req. 2.5(e). assess any existing mechanisms for The global standard for the good governance of oil, gas and mineral resources.
Beneficial Ownership Verification: Beneficial Ownership Verification: What the EITI Standard provides: What the EITI Standard provides: Gives MSG mandate to agree an appropriate approach, which could be tested and refined over time. Should be agreed and communicated prior to data collection, in consultation with government agencies already collecting and maintaining beneficial ownership data and reporting companies. EITI Validation will assess whether the relevant government entity or the MSG established an approach for participating companies to assure the accuracy of the beneficial ownership information they provide, and whether companies have complied with the established assurances. The global standard for the good governance of oil, gas and mineral resources.
Verification Mechanisms Verification Mechanisms Attestation: Attestation: requiring company to certify beneficial ownership declaration form. Supporting documentation: Supporting documentation: requiring company to attach supporting documentation to the declaration form verifying correctness of the information (copies of shareholder registers, powers of attorney, etc.). Authentication: Authentication: requiring company to provide verification of the identify of the beneficial owner by attaching proof of identity. Authorisation Authorisation: : requiring that company requests and provides written confirmation from the beneficial owner. The global standard for the good governance of oil, gas and mineral resources.
Verification Mechanisms Verification Mechanisms Validation: Validation: ensuring the data submitted is a legitimate possible value and cross- checking with other databases and official records. Truth Truth- -verification/red verification/red- -flagging: flagging: identifying and documenting red flags as part of data verification, and notifying relevant government agencies depending on the red flag. Other approaches? Other approaches? The global standard for the good governance of oil, gas and mineral resources.
