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Beneficial Ownership Screening (PDF 239.16 KB)
NRGI reviewed over 50 mining and oil laws and found that about half contained prohibitions on government officials or their close associates – often called “politically exposed persons” (PEPs) – holding interests in companies applying for extractives licenses, but none required regulators to actually check whether or not such PEP interests existed as part of screening license applications. This is a potentially critical gap in regulatory oversight, not least because a large body of real-world cases suggests that the ability to hide a company’s true beneficial owner is a major enabler of corruption in the granting of extractive rights.
A growing number of governments are developing legal policies and information systems for collecting and publishing data about the beneficial owners of extractives companies – the real people who own, control, or economically benefit from a company. These reforms range from amending company registration laws and creating national public registers to sector-specific approaches like establishing extractives transparency laws and licensing requirements. But to have an impact, extractive sector reforms may need to go beyond just requiring beneficial ownership disclosure, namely by establishing rules on what types of beneficial ownership linkages will be considered unacceptable self-dealing or corruption, and by determining the consequences that will apply when that line is crossed. Our research shows that a number of countries have already established such rules, but monitoring and enforcement is lacking. Given the corruption risks, improving national policies and practices on allocating extractive licenses should be at the forefront of these efforts.
This briefing offers advice on how governments can strengthen their extractives licensing policies and processes to tackle basic corruption risks posed by problematic beneficial ownership linkages. The briefing is organized around the following five aspects of the extractives licensing process, with recommendations and example legal provisions that national actors can use in each stage:
Resource-rich countries will need to choose beneficial ownership assessment rules that best address the political, legal and industry realities in which they award licenses. The model legal provisions offered as templates in this briefing should not be used without proper customization and harmonization within national and sectoral legal frameworks. These recommendations may be applicable to rules for license awards in sector laws, regulations or the guidelines for particular award processes. Regardless of where rules are stipulated, they should be subject to public consultation during their development, and publicly disclosed once finalized in order to facilitate monitoring and accountability.
A growing number of governments are developing legal policies and information systems for collecting and publishing data about the beneficial owners of extractives companies – the real people who own, control, or economically benefit from a company. These reforms range from amending company registration laws and creating national public registers to sector-specific approaches like establishing extractives transparency laws and licensing requirements. But to have an impact, extractive sector reforms may need to go beyond just requiring beneficial ownership disclosure, namely by establishing rules on what types of beneficial ownership linkages will be considered unacceptable self-dealing or corruption, and by determining the consequences that will apply when that line is crossed. Our research shows that a number of countries have already established such rules, but monitoring and enforcement is lacking. Given the corruption risks, improving national policies and practices on allocating extractive licenses should be at the forefront of these efforts.
This briefing offers advice on how governments can strengthen their extractives licensing policies and processes to tackle basic corruption risks posed by problematic beneficial ownership linkages. The briefing is organized around the following five aspects of the extractives licensing process, with recommendations and example legal provisions that national actors can use in each stage:
- Anticorruption provisions: Laying the legal foundation for tackling corruption in licensing
- Prequalification/application submissions: Collecting and publishing beneficial ownership information
- Initial screening: Disqualifying applications with manifest accuracy and corruption problems
- Final decision-making: Scrutinizing problematic beneficial ownership risks in selected awardees
- Complementary measures: Leveraging beneficial ownership disclosure for to address corruption
Resource-rich countries will need to choose beneficial ownership assessment rules that best address the political, legal and industry realities in which they award licenses. The model legal provisions offered as templates in this briefing should not be used without proper customization and harmonization within national and sectoral legal frameworks. These recommendations may be applicable to rules for license awards in sector laws, regulations or the guidelines for particular award processes. Regardless of where rules are stipulated, they should be subject to public consultation during their development, and publicly disclosed once finalized in order to facilitate monitoring and accountability.