This paper outlines a framework how to assess progress in meeting the beneficial ownership requirement (2.5) in EITI Validation. The framework was decided by the Borad in June 2019 (2019-48/BM-43). The framework seeks to ensure that implementing countries have adequate guidance in preparation for the approaching 1 January 2020 deadline. The framework consists of a technical assessment of meeting the requirements’ components, and an assessment of effectiveness.
The identity of the real owners – the ‘beneficial owners’ – of the companies that have obtained rights to extract oil, gas and minerals is often unknown, hidden by a chain of unaccountable corporate entities. This problem also affects other sectors and often helps to feed corruption and tax evasion. People who live in resource-rich countries are at particular risk of losing out as extractive assets are too often misallocated for corrupt reasons.
By 2020, all EITI countries have to ensure that companies that apply for or hold a participating interest in an oil, gas or mining license or contract in their country disclose their beneficial owners.
The EITI Standard also requires public officials – also known as Politically Exposed Persons (PEPs) to be transparent about their ownership in oil, gas and mining companies.
This information will be publicly available and will be published in EITI Reports and/or public registries. EITI requirements have sparked reform in 20 countries now working on establishing public registers.
Once published, law enforcers, civil society and others have a responsibility to scrutinize the information, and take action to hold to account those who misuse anonymous companies.
Hidden ownership also poses problems for honest companies because they don’t know who they are doing business with. Publishing the real owners will help ensure that there is a level playing field for all companies and allow them to know who they are doing business with.
Requirement 2.5 of the EITI Standard (2016) specifies what countries will do to uncover beneficial owners:
By 2020, all implementing countries have to ensure that 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 in their countries publish the names of their real owners.
This should include the identity of the owner, i.e. the name, nationality and country of residence. Companies are also encouraged to publish further details such as the date of birth, national identity number, residential address etc.
Any politically exposed persons holding ownership in oil, gas and mining projects must be publicly identified.
The EITI recommends that beneficial ownership information is made available through public registers. At a minimum, the information must be published in the country’s EITI Report.
The EITI Standard defines beneficial ownership as follows:
2.5 f) Definition of beneficial ownership:
i. A beneficial owner in respect of a company means the natural person(s) who directly or indirectly ultimately owns or controls the corporate entity.
ii. The multi-stakeholder group should agree an appropriate definition of the term beneficial owner. The definition should be aligned with (f)(i) above and take international norms and relevant national laws into account, and should include ownership threshold(s). The definition should also specify reporting obligations for politically exposed persons.
iii. Publicly listed companies, including wholly-owned subsidiaries, are required to disclose the name of the stock exchange and include a link to the stock exchange filings where they are listed.
iv. In the case of joint ventures, each entity within the venture should disclose its beneficial owner(s), unless it is publicly listed or is a wholly-owned subsidiary of a publicly listed company. Each entity is responsible for the accuracy of the information provided.
Since 2013, the fight against secret company ownership has gained great momentum. The G8 and G20 have made transparency in beneficial ownership a key priority. The European Union has required member states to establish registers. Several countries have passed national legislation and are working towards public registers. Yet, to date, there is relatively little beneficial ownership information out in the open.
The EITI is one of few organisations that has delivered practical results through annual collection and publication of beneficial ownership information in EITI Reports, and through the beneficial ownership pilot conducted in 11 countries from 2013-2015.
By early February 2017, fourty-five EITI countries have published beneficial ownership roadmaps which outline how they are going to reach publish beneficial owners.
As of 1 January 2020, the EITI Standard requires that implementing countries request, and companies disclose, beneficial ownership information (Requirement 2.5). This requirement applies to companies that apply for or hold participating interests in a country’s extractive sector and requires disclosure of their beneficial owners, the level of ownership and details about how ownership or control is exerted. To achieve this Standard in most implementing countries,
The Extractive Industries Transparency Initiative (EITI) requires its 52 implementing countries to disclose beneficial ownership information by 1 January 2020. Since the requirement was agreed by the EITI Board in 2016, several governments have introduced reforms. There have been varying degrees of progress given the different political contexts, government systems and levels of capacity. However, considerable progress has been made in developing legal frameworks, increasing awareness among stakeholders,
Relates to requirement 2.5
Guidance on developing a beneficial ownership roadmap consists of:
Relates to requirement 2.5
The EITI Standard requires that the beneficial owners of extractive companies are disclosed. Multi-stakeholder groups (MSGs) have an important role in ensuring that these disclosures are comprehensive and effective. Whether beneficial ownership data is collected and disclosed by a government agency or through the EITI process, the MSG should ensure that disclosures are in line with the EITI Standard, assess gaps and weaknesses and find ways to strengthen disclosures.
Tools for countries implementing requirement 2.5 of the Standard:
A model beneficial ownership declaration form (excel file, see attachment below)
Standard Terms of Reference (ToR) for Independent Administrators (IA) including instructions for multi-stakeholder groups who wish to task the IA with collecting and collating beneficial ownership data (word doc
Moving from developing a roadmap to implementing the first steps to disclose the beneficial owners of oil, gas and mining companies, the International Secretariat provides the following resources:
There are clear benefits for companies operating in countries with beneficial ownership registers:
Reduces risk in business relationsCreates a level playing fieldImproves investment climatePrevents corruption and illicit flowsBuilds trust.
Find out more in this factsheet.
A further resource for why beneficial ownership transparency is positive for business is www.openownership.com
Description: The EITI Board amended requirement 2.5.c to clarify the current ambiguity:
As of 1 January 2020, it is required that implementing countries request, and companies disclose, beneficial ownership information for inclusion in the EITI report. This applies to corporate entity(ies) that bid apply for, operate or invest in extractive assets or hold a participating interest in an exploration or production oil, gas or mining license or contract and should include the identity(ies) of their beneficial owner(s),
An infographic showing the five steps for countries towards a beneficial ownership register for companies active in the extractive industries by 2020.
More than 50 EITI countries have published their plans for how to disclose the real owners of companies in their extractive sector by January 2020. This includes building an institutional and legal framework, putting in place reporting processes and creating registers to host the BO data. Implementing countries will need substantial advice and political support in turning these commitments into reality. This brief highlights progress made so far by a selection of EITI countries in “opening up ownership”.
The Progress Report is the EITI’s annual overview of the progress to improve transparency and governance of natural resources in the EITI countries around the world.
Download the PDF of the EITI Progress Report 2017 below.It is available in EN, FR, ES. Access the online version here
An eight-page fact sheet on how EITI countries are moving towards disclosing the real owners.
Transparency about company and government payments is important for accountability, but tells citizens little about who owns extractive companies and ultimately benefits from the companies’ activities. In many cases, the identity of the real owners – the ‘beneficial owners’ – of the companies that have acquired rights to extract oil, gas and minerals is unknown, often hidden behind a chain of corporate entities. This opacity can contribute to corruption, money laundering and tax evasion in the extractive sector.
These Standard Terms of Reference for Independent Administrator services below have been reviewed to include instructions for multi-stakeholder groups who wish to task the IA with collecting and collating beneficial ownership data.
For the original Standard Terms of Reference for Independent Administrator services, visit this page.For Standard Terms of Reference for Independent Administrator services including provisions to include project level reporting,
A Manual on Integrity Due Diligence for Licensing in Extractive Sectors
Cari L. Votava, Jeanne M. Hauch and Francesco Clementucci
Reducing corruption in the extractive sectors is now a high priority of the global development agenda because of the degree to which such corruption can impede economic development and contribute to illicit financial flows (IFFs). This kind of corruption can prove complicated and intractable to eliminate because mitigating corruption in natural resource and extractive sectors requires enhancing transparency and improving the quality and effectivenes