TRANSPARENCY: Anxiety As Beneficial Ownership Register Deadline Nears
-By Fred Ojiegbe
Stakeholders have been assessing Nigeria’s readiness to meeting the requirements of transparency watchdog, the Extractive Industries Transparency Initiative (EITI) January 1, 2020 deadline for countries including Nigeria to comply with its mandate to have a public register of beneficial or real owners of companies in the extractive industry.
EITI is the global body that sets standards geared towards promoting the open and accountable management of oil, gas and mineral resources across the globe. NEITI which is the Nigerian branch of EITI was established in 2007 by the NEITI Act, 2007 with the primary objective of ensuring that Nigeria conforms with the principles of EITI, among other things, developed a roadmap on the implementation of beneficial ownership in Nigeria.
EITI defines a beneficial owner in respect of a company to mean the natural person(s) who directly or indirectly ultimately own, control or benefit from a company (or any other form of legal vehicle).
According to a March 2019 Beneficial Ownership Implementation Toolkit prepared by the Secretariat of the Global Forum on Transparency and Exchange of Information for Tax Purposes for the Inter-American Development Bank (IDB), anonymity enables many illegal activities to take place hidden from law enforcement authorities, such as tax evasion, corruption, money laundering, and financing of terrorism.
The IDB report, said for example, that money laundering can involve complex operations and transactions to make money from illicit sources, such as drug trafficking or tax evasion, appear legal.
The report noted that governments can significantly benefit by identifying these hidden funds and levying taxes. In the case of African countries, both the UN and African Union have estimated that countries across the continent could gain US$50 billion each year by stemming illicit financial outflows, which are facilitated by shell companies.
For these and many other reasons, the G8, G20, and EU member states had in 2013, 2014, and 2015, respectively agreed to establish registries. In 2016, various countries at the Anti-Corruption Summit in London including Nigeria came forward to pledge to establish public registries of beneficial ownership.
The countries agreed that all registers must list the ultimate beneficial owner (UBO) and include the same basic information: name, month of birth, nationality, country of residence, and nature/size of the interest held.
Overall, several countries have centralized registers, but only a handful–including the United Kingdom, Denmark, and Ukraine–have made their registers publicly available.
Specifically in the extractive sector, anti-corruption group like the EITI developed the global standard to require countries and companies to disclose information on the governance of oil, gas and mining revenues. With regard to beneficial ownership.
The EITI Standards 2016 require that – By 1 January 2020, all implementing countries have to ensure that all oil, gas and mining companies that apply for, or hold a participating interest in an oil E&P asset or contract in their countries publish the names of their real owners.
EITI also require that any politically exposed persons holding ownership in oil, gas and mining projects must be publicly identified. 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.
Going by this, Nigeria as one of the 52 EITI implementing countries required to have in place a public register of all beneficial owners of extractive companies operating within their territories by January 2020.
EITI requirements have already helped to trigger 20 countries to set up public registers.
Why Beneficial Ownership Register
As a resource-rich country plagued by grand corruption, beneficial ownership transparency has emerged as an important tool. For example, Global Witness helped to uncover shell companies that have since been implicated in the alleged theft of US$1.1 billion in revenues from the awarding of an oil field to a Nigerian company, Malabu Oil & Gas, which was actually owned by a former oil minister. Currently, two global oil companies, ENI and Shell, are standing trial with others in Italy over allegations of corruption related to this deal, which is estimated to have cost Nigeria US$6 billion in potential revenues. Overall, it has been estimated that US$15.7 billion in illicit flows leave the country’s financial system every year.
For this reason, there has been increasing momentum on beneficial ownership reform worldwide.
For instance, the US House of Representatives recently passed the Corporate Transparency Bill, marking the first stage in a bid to clamp down on shell companies with opaque ownership. The next stage in the legislative process is Senate approval.
Under the Corporate Transparency Bill, also known as the Maloney Bill, corporations and limited liability companies (LLCs) would be required to disclose their true, beneficial owners at the time the company was set up to prevent people from using anonymous shell companies to thwart law enforcement and hide their illicit activities.
Currently no US state requires companies to provide the identities of the company’s true, beneficial owners.
‘The illicit use of anonymous shell companies is one of the most pressing national security problems we currently face,’ said Congresswoman Carolyn B Maloney (D-NY).
‘They are being used by money launderers, criminals, and terrorists – but we can stop that. We’re the only advanced country in the world that doesn’t already require disclosure of this information — and frankly, it’s an embarrassment.
The Nigerian efforts so far
Nigeria in the last three years has outlined beneficial ownership roadmaps detailing plans the reforms needed between then and 2020 to be compliant with EITI’s beneficial ownership requirement that all companies applying for or holding a participating interest in an oil, gas, or mining license or contract disclose their beneficial owners.
NEITI which is driving the process on for having the register in collaboration with the corporate affairs commission (CAC), Department of Petroleum Resources (DPR) and the mining cadastre office (MCO) on behalf of the federal government since 2016 had outlined beneficial ownership roadmaps detailing plans and the reforms needed between then and 2020 to be compliant with EITI’s beneficial ownership requirement that all companies applying for or holding a participating interest in an oil, gas, or mining license or contract disclose their beneficial owners.
After the October and November target to have the register go public failed to work out, there is growing anxiety over the county’s preparedness to have the register before the stipulated time although the NEITI has assured that a beneficial owner’s register of companies operating in the extractive industries will soon be ready and that the country would not default.
Efforts towards having the register by 31 December 2019 deadline has culminated in consultative meetings / sessions with the following Civil Society Organisations, companies operating in the extractive industries, relevant MDAs (Corporate Affairs Commission (“CAC”), Mining Cadastre Office (“MCO”), Department of Petroleum Resources (“DPR”), Bureau of Public Procurement (“BPP”), etc.
Challenges for Nigeria
Despite efforts so far made to meet the deadline, in Nigeria, however, whereas the relevant government agencies, particularly the Department of Petroleum Resources (DPR) and the Mining Cadastre Office (MCO), have successfully developed a template for collection of beneficial ownership information and the register, there is still no law backing beneficial ownership disclosure.
The Companies and Allied Matters Act (CAMA) Amendment Bill which gives legislative backing to disclosure of beneficial ownership has been transmitted to the president for assent by the National Assembly but he is yet to sign it.
Speaking during a stakeholders workshop on Beneficial Ownership Register in Port Harcourt, a lawyer and partner at Ikeyi Shittu & Co, Mr. Nduka Ikeyi said: “If we do not do this register by midnight December 31, 2020, Nigeria will be sanctioned”.
Nigeria earlier in the year attained EITI ‘Satisfactory progress’ rating which is one of the highest any country can achieve.
Experts say the country risks losing the impressive ‘Satisfactory progress’ ranking should its register fail to be in place by January 1, 2020.
Mr. Ikeyi said in the absence of the amended CAMA, some measures urgently need to be taken.
He said: “It is believed that a presidential executive order directing the Ministry of Petroleum Resources and Ministry of Mines and Steel Development to exercise their statutory powers to issue regulations for a mandatory beneficial ownership disclosure in the extractive industry and establishment of an online beneficial register freely available to the public,” is necessary for Nigeria to avoid the imminent consequences of missing the deadline. “Both ministers should issue regulations to enable implementation of beneficial ownership disclosure and publication regime in the oil and gas sector,” he added. He said an executive order or a circular from the president directing both ministries to implement beneficial ownership disclosure will compel more action and public awareness.
However, NEITI has expressed hope that should there be no executive order in place and a regulation, the voluntary beneficial ownership information it has been collecting from the companies could serve as alternative.
