Prime Minister Dr Keith Rowley was among world leaders who addressed the game-changing Anti-Corruption Summit 2016 in London on May 12. He pledged this country’s commitment to prosecuting those engaged in acts of corruption, to recovering assets unlawfully gained from these acts and to identifying the real owners of locally registered companies.
He stated, “T&T is open and committed to assisting its international partners in the fight against corruption. T&T will work towards the establishing of a registry of company beneficial ownership information. T&T commits to ensuring that law enforcement agencies have full and effective access to beneficial ownership information for companies and other legal entities registered within its jurisdiction.”
The Prime Minister’s pronouncement on identifying beneficial owners is in keeping with work currently being done as part of T&T’s implementation of the Extractive Industries Transparency Initiative (EITI).
The TTEITI steering committee, that oversees implementation, is preparing to publish T&T’s first Beneficial Ownership Register by June 2016. It represents another step to advance the promotion of transparency, accountability and good corporate governance in the extractive sectors by disclosing the “real” owners of companies that extract and market the energy resources which belong to all citizens.
Greater transparency will contribute towards the enhancement of a sound business climate that will encourage increased investment and help in building trust among government, companies, civil society and the general public.
Underlying the EITI requirement of beneficial ownership disclosure is the fact that, whereas transparency about government’s revenues from the extractive sectors is important for accountability, it does not tell the whole story. Equally important is who owns and ultimately profits from the activities of the oil, gas and mining companies. With the adoption of the EITI Standard 2016, the 51 EITI implementing countries have agreed that all countries must ensure that companies disclose by year 2020 their beneficial owners.
The EITI standard requires that implementing countries maintain a publicly available register of the beneficial owners of the corporate entity (ies) that bid for, operate or invest in extractive assets, including the identity (ies) of their beneficial owner(s), the level of ownership and details about how ownership or control is exerted. Where possible, beneficial ownership information should be incorporated in existing filings by companies to corporate regulators, stock exchanges or agencies regulating extractive industry licensing.
EITI chair Fredrik Reinfeldt said at the Anti-Corruption Summit, “EITI members are showing leadership on beneficial ownership disclosure.” The issue of beneficial ownership and that of commodity trading transparency were among the central pillars of the summit. Heads of state, senior industry and civil society leaders discussed those issues and strategies were proposed for international co-operation to tackle them.
The Panama Papers were a stark reminder of the importance of the EITI requirements on beneficial ownership reporting to tackling issues of improper award of contracts and licenses and resultant money laundering and tax evasion etc. Ensuring openness and minimising the possibilities for undue secrecy requires efforts not only in the tax havens but also in countries where the money comes from.
These are often the resource rich countries, like T&T, which make up the EITI membership. Therefore, it is welcome news to those in the EITI movement that the Summit decisions will take the transparency agenda further and also demonstrate the need to work at all levels to end ownership secrecy.
Beneficial owners and politically exposed persons
Who are the beneficial owners of companies?
The TTEITI steering committee was guided by T&T’s Companies’ Act and the Integrity in Public Life Act in developing its definition of beneficial ownership in the local context. Beneficial ownership is defined as, “the natural person who is directly or indirectly the owner of a company or controls at least ten per cent of the shares or total votes and exclude persons acting as a nominee, intermediary, custodian or agent on behalf of another person. Politically exposed persons, who otherwise benefit financially from the company, are also considered to be beneficial owners.”
Who are politically exposed persons?
The TTEITI Steering Committee sought guidance from T&T’s laws to define a politically exposed person and, in so doing, expanded the definition provided by the Financial Intelligence Unit of the Ministry of Finance Guidance Note AML/CFT Procedures for Politically Exposed Persons. A politically exposed person is defined as “an individual who is or has been entrusted with a prominent political function. These include foreign and local political figures and extend to their immediate family members and close associates.”
Commodity trading transparency was a related issue that received the attention of the summit. Commodity trading transparency is central to the EITI process because it facilitates the tracking of the correct amount of revenue payable by companies to government.
Among other things, the EITI standard requires disclosure of the revenue received by the state-owned companies for the sale of their share of production broken down by buying company.
The summit opened up a dialogue among the key trading countries and others to accelerate progress towards greater transparency on the state’s share and on onward trading, and that complements what is already happening through the EITI implementation process.
The EITI standard requires that where the sale of the state’s share of production or other revenues collected in kind is material, the government, including state-owned enterprises, are required to disclose the volumes sold and revenues received. The published data must be disaggregated by individual buying company and to levels commensurate with the reporting of other payments and revenue streams.
EITI reporting could also break down disclosures by the type of product, price, market and sale volume. Where practically feasible, steering committees are encouraged to task the Independent EITI administrator with reconciling the volumes sold and revenues received by including the buying companies in the reporting process.
When closing the summit, UK Prime Minister David Cameron said in relation to the fight against corruption: “Nothing is more powerful than an idea whose time has come.” That sentiment can be applied equally to the idea of the 13-year old EITI that, among its many benefits, promotes transparency and accountability in the management of the country’s natural resources revenues and is a major disincentive to corruption. T&T can consider itself fortunate to be an EITI implementing country at this time of falling commodity prices and other economic challenges at home and abroad.
Victor Hart, is the chair, TTEITI steering committee and international EITI board member.