As the extractive sector continues to evolve, so too does the EITI Standard. Since it was first launched in 2013, the EITI Standard has been adapted to respond to emerging risks in the extractive sector. One of the key changes includes provisions to integrate anti-corruption in EITI implementation. Addressing corruption has now become a core objective for specific requirements, including beneficial ownership.
With more than 120 countries committed to beneficial ownership transparency, this reform has become a global norm that jurisdictions must embrace to align with international transparency and accountability principles. Knowing the individuals involved in business transactions between companies and governments is crucial for safeguarding reputations and fostering trust. It empowers informed decision-making on potential business relationships and serves as an important tool for combatting corruption.
The global energy transition underscores the need for this reform. Shifting demand for oil, gas and minerals can exacerbate corruption risks in the extractive sector, making transparent and accountable resource governance even more critical. In this context, beneficial ownership transparency plays a pivotal role in ensuring that the benefits generated from natural resources reach citizens rather than vested interests. Using public registers can support a myriad of goals, including investigating corruption, tracking financial flows, preventing conflicts of interest, highlighting irregularities, and improving due diligence and sanctions screening, among others.
Moving the needle on beneficial ownership
Beneficial ownership requirements have evolved significantly over the past decade. In 2013, the EITI Standard recommended that countries establish public company registers. Three years later, the EITI Standard introduced a landmark requirement, mandating the disclosure of beneficial owners of oil, gas and mining companies as of January 2020. From a small pilot of countries in 2013, over 30 EITI countries are now disclosing beneficial ownership data either through registers or EITI Reports.
The 2023 EITI Standard takes this further: strengthened provisions include lower thresholds for reporting beneficial ownership data and no thresholds for politically exposed persons (PEPs), enhanced linkages to licensing, better oversight of the ownership of state-owned enterprises (SOEs) and publicly listed companies (PLCs), reporting legal ownership and ownership chains, and companies’ use of beneficial ownership data for due diligence.
1. Lowering thresholds for reporting beneficial owners (2.5.f.ii)
When establishing the definition of beneficial ownership, jurisdictions specify the minimum stake an individual needs to own or control in a company, such as possession of ownership shares or voting rights. The lower the threshold, the easier it is to identify hidden interests. Recognising that the extractive sector is prone to corruption risks, the EITI Standard now encourages countries to adopt a threshold of 10% or lower for beneficial ownership disclosures. This ensures that most or all ownership interests are disclosed, leaving no room for hidden interests.
While early adopters like the UK and Ukraine established a 25% threshold in 2015, more recent legislation across jurisdictions has set lower thresholds. Now, more than 20 EITI countries have embraced a threshold of 10% or less, including Argentina (1 share or above), Colombia (5%), Nigeria (5%) and Senegal (2%). Several countries have also adopted lower thresholds specifically for high-risk sectors such as the extractives, including Armenia (10% for mining sector, versus 20% for other sectors), Ghana (5% for locally registered extractive sector companies, versus 20% for low-risk sectors) and Liberia (5% for mining, oil, gas and agriculture, versus 10% for the forestry sector). Still, many countries have yet to follow suit.
2. Ensuring reporting of PEPs to detect conflicts of interest (2.5.f.ii)
The 2023 EITI Standard strengthened the requirement for disclosure of PEPs who directly or indirectly hold an interest in a company, by requesting full disclosure of PEPs regardless of their level of ownership.
These disclosures are paramount for identifying conflicts of interest. Conversely, a lack of transparency on PEPs and their assets – specifically those held in the extractive sector – can pose high corruption risks, especially when PEPs are involved in the award of natural resource concessions. Countries like Armenia, Ghana or the Kyrgyz Republic require beneficial owners that are PEPs to disclose their ownership or control irrespective of the size of the stake. Initiatives like “Joining the dots” demonstrate the value of using this information.
3. Linking to licensing process (2.2.c)
The 2023 EITI Standard reinforces the connection between licensing and beneficial ownership information, helping ensure that licenses are granted to transparent and accountable entities. EITI countries are encouraged to link publicly available license registers to government platforms containing information about legal and beneficial owners of oil, gas and mining companies.
This linkage can help regulators analyse who is behind the legal entities applying for, holding or transferring licenses. Although few jurisdictions actively link license and beneficial ownership information, the Opening Extractives programme, implemented by the EITI and Open Ownership, is supporting countries like Colombia, Ghana, Indonesia and Zambia to ensure that beneficial ownership data is actively used for license screening.
4. Capturing control and ownership of SOEs, their suppliers and PLCs (2.5.f.iii, v and 2.6.e)
The 2023 EITI Standard now requires SOEs to disclose the name of the state(s) owning or controlling the SOE, the level of ownership and details about how ownership or control is exerted. SOEs are also encouraged to disclose the identity and beneficial ownership of their agents or intermediaries, suppliers or contractors for material transactions, which can help close avenues for corruption.
EITI multi-stakeholder groups are also encouraged to review the comprehensiveness and reliability of ownership data disclosed in stock exchange filings. Doing so can help address gaps in certain jurisdictions where publicly listed companies might take advantage of lax transparency requirements.
5. Disclosing legal ownership and ownership chains (2.5.g)
Implementing countries are now required to disclose legal owners, while companies are encouraged to disclose their ownership structure, including the full chain of legal entities leading to the beneficial owner. This can help to map the entire scope of companies and relationships between individuals and legal entities that control, influence or own a company, which can inform investigations on conflicts of interest.
6. Using beneficial ownership for company due diligence (1.2.b)
Both EITI supporting companies and reporting companies are expected to publish an anti-corruption policy setting out how they manage corruption risk, including their use of beneficial ownership data. Such information can help the private sector to actively tackle risks by identifying who they are doing business with.
The elephant in the room: privacy concerns
Some EITI countries have remained reluctant in publicly disclosing beneficial ownership information, citing concerns related to privacy and personal data protection. Striking a balance between transparency and individual privacy remains a challenge.
Despite a ruling by the Court of Justice of the European Union that decided that public access to beneficial ownership registers is no longer valid in all instances, several countries have kept their registers public. Questions related to what constitutes legitimate interest to access beneficial ownership data, in particular for owners of companies holding or bidding for extractives licenses, should be explored further by countries affected by the ruling.
Yet the importance and value of public disclosure of beneficial ownership in the extractive sector is evident. Natural resources ultimately belong to citizens, and transparency is key to ensuring that these resources are used for their benefit. EITI countries should continue to make progress on collecting and disclosing beneficial ownership data as required by the EITI Standard. Several countries have shown their commitment to this agenda by establishing public registers, including Armenia, Ghana, Indonesia, Liberia, Nigeria, United Kingdom and Zambia. While more work needs to be done to ensure data is comprehensive and reliable, these examples demonstrate that the gains outweigh the risks.
The provisions in the EITI Standard on beneficial ownership transparency, now a global norm, strengthen the EITI's commitment to mitigate extractive sector corruption. In the era of the energy transition, these provisions become even more vital to ensure a fair and transparent playing field. The EITI remains dedicated to assisting implementing countries in realising this objective, and the requirements on beneficial ownership transparency serve as a testament to the organisation's proactive stance in driving this agenda forward.
This blog is part of a broader anti-corruption series delving deeper into changes to the EITI Standard. Learn more.