Ever wondered why billions of dollars evade detection each year? It’s often due to opaque beneficial ownership structures, concealing the true beneficiaries of wealth and facilitating corruption.
Governments around the globe have committed to enhance beneficial ownership transparency (BOT) by disclosing the true owners or controllers of companies and other corporate entities. However, only 74 countries have taken the step of establishing a beneficial ownership register thus far.
Countries can improve their ability to detect money laundering and tax evasion more effectively by implementing BOT reforms, which serve to deter illicit activities associated with shell companies used to conceal true owners and financial transactions. In fact, the Financial Action Task Force (FATF) Recommendation 24, committed to by over 200 jurisdictions around the world, requires countries to ensure that beneficial ownership information is held by a public body functioning as a beneficial ownership register, or an alternative mechanism that enables efficient access to the information.
In our discussions with counterparts and partners, we noticed that there is an increasing demand for financial and technical assistance in implementing beneficial ownership registers in various countries.
While comprehensive guides and toolkits exist for building beneficial ownership frameworks, including the FATF Guidance on Transparency and Beneficial Ownership, the OECD/IDB Building Effective Beneficial Ownership Frameworks, and the Open Ownership Guide to Implementing Beneficial Ownership Transparency , this note specifically focuses on country experiences in implementing a beneficial ownership register, placing emphasis on the institutional arrangements, technical solutions, and costs. We reviewed the implementation experiences of four countries in establishing beneficial ownership registers and we share below eight actionable recommendations that emerged which could be useful for similar reform efforts elsewhere:
1. Having an enabling environment that is conducive to the implementation of a beneficial ownership register. Civil society advocacy and high-level political commitment to enhancing BOT and compliance with FATF Standards and EU Anti-Money Laundering Directives were vital catalysts for BOT reforms in the countries reviewed.
2. Engaging with various stakeholders and collaborating with international partners to leverage expertise, resources, and global best practices has been instrumental in the successful development and launch of beneficial ownership registers in Nigeria, North Macedonia, and Kenya.
3. Placing the register with an entity that offers strategic opportunities. The location of a beneficial ownership register differs from one country to another. For instance, in Argentina, Colombia, and Ecuador, beneficial ownership registers are managed by the tax authority, while in Indonesia and Spain the Ministry of Justice oversees the beneficial ownership register. In the four countries discussed in this note, the beneficial ownership register is housed within the business registration authorities. While a particular policy goal may have influenced the choice of the placement of the beneficial ownership register, achieving other policy objectives through interoperability and real-time access is equally feasible. Key factors to consider in selecting the location include enforcement powers, technical capacity, and the entity’s reach with key stakeholders.
4. Ensuring interoperability. The four countries examined have adopted custom-built software solutions for their beneficial ownership registers, emphasizing interoperability with existing government systems. For example, Kenya and North Macedonia have integrated beneficial ownership data into the public procurement system. This not only aligns with the updated FATF Recommendation 24 but also serves as a crucial anticorruption measure.
5. Using a standardized format like the Beneficial Ownership Data Standard (BODS) is crucial for ensuring consistency, enabling seamless data exchange and interoperability between different registers, and facilitating the international sharing of beneficial ownership information.
6. Increasing compliance in applying sanctions and promoting awareness of disclosure requirements among reporting entities. Insufficient enforcement can lead to inaccurate and outdated information in the beneficial ownership register.
7. Measuring outcomes. While there have been attempts to assess the impact of BOT reforms, particularly through UK government-commissioned evaluations, accurately gauging outcomes remains a challenge. To garner further support for BOT reforms, it is crucial to implement improved outcome measurements focusing on their influence in curbing corruption, illicit financial activities, and enhancing tax compliance.
8. Sustaining reforms. Incorporating financial sustainability considerations into the design and implementation of a new beneficial ownership register is crucial for its long-term effectiveness. In North Macedonia, for instance, the beneficial ownership register is financially sustained through user fees, establishing a self-sustaining funding model.
While the countries reviewed have made notable progress in enhancing BOT, measuring the impact of beneficial ownership registers on tax compliance and control of corruption remains a challenge. We are expanding World Bank support in this area by collaborating with our partners to provide technical assistance and share our knowledge. The session we had on beneficial ownership registers at the Anticorruption for Development (AC4D) Global Forum recently is one example. BOT reforms can succeed when all stakeholders come together. This is why the World Bank is deepening its emphasis on this agenda through its Global Anticorruption Program and operations in regions around the world.
Editor’s note: The World Bank’s Anticorruption for Development Program and the GovTech Global Partnership have supported the development of this EFI Insight to share experiences and inform future support for BOT reforms.
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