Q&A: What’s next for Mongolia’s beneficial ownership transparency and anticorruption agenda

[Editor’s Note: Over the past few weeks, R4D’s Leveraging Transparency to Reduce Corruption (LTRC) team reconnected with country experts and practitioners they have engaged with over the last couple of years to discuss their work together, and the challenges ahead. In a five-part series of interviews, they highlight the experiences and perspectives each of them have on strengthening extractives governance, transparency, and accountability. In this post, Tegshbayar Darambazar explains how recommendations developed by LTRC is helping Mongolian government and its different organizations enhance beneficial ownership transparency ownership.]

Based on your broad knowledge working across anticorruption and governance, what are the three biggest challenges in Mongolia?

Reducing corruption in Mongolia is a very complex issue, because it is deep-rooted. The current government of Mongolia is approaching the issue of anticorruption from a different perspective by not solely focusing on criminalizing corruptors or wrongdoers, which was the sole focus of the previous governments, but instead taking a systematic approach to the problem. For this reason, the government of Mongolia asked Transparency International to work as an adviser in the working group that has been established to improve Mongolia’s ranking on the Corruption Perception Index (CPI) by 2023.

The first challenge in Mongolia is the knowledge gap on fighting corruption, especially within government organizations. In the past, the fight against corruption was all about laws, the criminalization of wrongdoers, and judicial integrity. Unfortunately, it’s not only about these issues and that’s partially why we have failed substantially in this effort. Corruption is wide-ranging, and it affects different policy areas – from the overall economic performance of the country, its investment potential, the budget and even inflation management, and not limited to government checks and balances. That means we need to understand the complete picture of what it encompasses to know where we need to put our strength and distribute our resources.

The second challenge is that corruption is deep-rooted in Mongolia: there is a cartel-like connection among politically affiliated people. Initiating and receiving support from decision-makers and parts of government for actions that tackle corruption is difficult. Although the initiative to improve Mongolia’s CPI came from the Prime Minister, there are still a lot of challenges in implementing the goals set forth in the action plan. Some have in fact started to lobby the general public in a campaign against what the government has been trying to achieve. This is a very big issue. The fight against corruption strongly needs public support and legislators must understand that they need to be broad-minded and supportive of these anticorruption efforts.

The third issue is that many people and businesses think Mongolia’s anticorruption agency is the sole agency responsible for the fight against corruption. This means that they do not always understand or are aware of the changes that the government is making. There has even been backlash by some against extra compliance requirements for procurement and tenders by state-owned enterprises (SOE). Studies have shown that the procurement of services, goods and products by SOEs and public offices is precisely where the core of corruption is in Mongolia. It leads to conflicts of interest, unfair market competition and political financing. To properly tackle this, the government needs support from all groups in society.

You mentioned several issues associated with beneficial ownership in Mongolia. How would you suggest ‘pushing the needle’?

The government’s agenda of improving Mongolia’s CPI by 2023 is challenging. It is doable, but we need to move faster and address the issues from all angles. Within this framework, the government aims to improve beneficial ownership transparency in Mongolia, which is a product of the efforts and awareness raised by international organizations in the past. It is indeed aimed at effectively tackling crimes domestically but also to comply with international requirements. It has already led to many changes in the laws – one of which is the law on legal entity registration. We have incorporated several clauses to make the beneficial ownership database open and accessible to the public.

But now, the issues we face include how to verify whether the database really registers the beneficial owners of legal entities or merely their legal shareholders, how to use the database in practice, and how to validate and enhance the information to make it solid evidence that is acceptable both from a human rights perspective and as an investigation and prosecution tool. We are facing many challenges in terms of the capacity and resources needed for improving the system.

What are you doing to aid this implementation?

We are new in this area, and we are all learning. The Leveraging Transparency to Reduce Corruption (LTRC) initiative has done a lot in increasing awareness on beneficial owners and the use of the database; what the government is facing right now; and what they need to do in the future. They have conducted research in Mongolia with my advice, which has provided useful recommendations. The government of Mongolia is using LTRC’s research to improve the transparency and efficiency of the beneficial ownership register.

But as I mentioned, in terms of implementation, we are still facing challenges. To achieve the goals of beneficial ownership transparency in Mongolia, we need to consolidate the databases of different government organizations to be able to validate information on legal ownership, asset and income declaration of public officials, and more. That data needs to be interfaced.

Another thing we have completely overlooked is the importance of tax information. Looking at international standards and the experience of developed countries, we observe that having a beneficial ownership register is a good thing, a very supportive tool to fight corruption and conflict of interest, especially in terms of revealing and tracking dirty money. However, the information we can access through the registry is conditioned by the quality of available tax data and tax statements of individuals. For example, Mongolia has limited the use of third-party commercial information, which limits the identification of irregularities through the registry.

Having all government data on assets, income, beneficial ownership, and tax interfaced for cross-checking would make a difference in strengthening the beneficial ownership transparency process. Otherwise, beneficial ownership data can become obsolete. This is a problem that Mongolia is facing right now. Part of our work is aimed at identifying the country’s needs and generating evidence that supports alignment with international best practices.

The national anticorruption strategy in Mongolia is now successfully in place. How does the dedicated commission or office support that strategy?

The Minister of Justice heads the anticorruption working group that has adopted the two-year action plan to improve the CPI. Stakeholders involved in implementing the action plan are other government agencies. The anticorruption agency is actively involved. Meanwhile, the agency is developing a National Program on Anti-Corruption, which will be in effect for the next decade and should support the government’s actions aimed at improving the CPI.

But for public offices, there remains a challenge of understanding the complexity of what corruption involves. The major task of the government in the fight against corruption is to raise awareness of public officials. We must also involve all stakeholders — the private sector, the NGOs, researchers, reporters, etc. — in awareness raising. The action plan came from a high level, but when it comes to implementation, much still needs to be done at the mid- and lower levels.

For one, although Mongolia has good laws, the judiciary does not use precedent in deciding cases. Hence, similar cases have been resolved differently, making it difficult to provide standardized training for investigators, prosecutors, judges and to build the capacity of lawyers, whistleblowers, researchers and investigative journalists.

Secondly, we also need more domestic anticorruption experts who possess the knowledge and experience practicing both domestically and internationally, and are aware of international trends, standards and practices. Knowing theory is important, but in practice, the ability to apply that theory’s evolution to close gaps within the domestic environment is becoming more important.

To give you an example of why, I have to mention the previous National Program on Anti-Corruption, implemented between 2012 and 2022. It has been assessed that 75 percent of all objectives were completed successfully, which is pretty impressive. Mongolia’s CPI must have improved over its course. But since 2015 the CPI worsened, almost reaching a record low, proving that targeted objectives on anticorruption were not “spot-on.”   

So now, the Independent Agency against Corruption stresses the importance of having specialized, continuous training for all relevant stakeholders and creating a case-flow database on corruption. The identification of objectives for the national program and the mid-term strategy on anticorruption is being organized in collaboration with private sector companies, civil society and field experts, which is giving us hope for better change.

How has the collaboration and work with LTRC been received? What do you see as the value of this partnership?

I have been engaging with LTRC since 2020, and it’s been a great experience. LTRC is very efficient, and prone to new recommendations and new ideas. That is why I think what we have done in Mongolia around beneficial ownership has been effective. The government and its different organizations are using analysis and recommendations developed by LTRC about how to enhance beneficial ownership transparency, and they are inviting other international organizations to support the implementation.

However, there are many areas that we need to improve on. We need to learn from the best international experiences so that we do not recreate the wheel, especially around illicit money flows and tracking them. LTRC has broad and in-depth knowledge as well as consultants and advisors specialized in different areas — not only in beneficial ownership but also on money laundering and tax compliance issues — that we could use in the future. I think the government should consider this potential and build upon LTRC’s experience of working in Mongolia. I hope that it will follow up on LTRC’s recommendations and set up a more stable relationship in the future.

How do you keep your enthusiasm and motivation around this? What inspires you to do more?

My specialization and interest are in financial crime compliance and issues around corruption and conflicts of interest. Looking at what we have done with Transparency International Mongolia, we are very enthusiastic this time because our ideas for addressing corruption go beyond what has been unsuccessfully done in the past. Rather, we now focus on core areas of corruption and conflicts of interest that have been supported by the government. The core area of corruption is in the SOEs’ and public offices’ procurement and tenders, and the core sector to address is the extractive sector. Results may not be seen immediately, but I am looking forward to positive changes. It is a rapidly changing society with constant technological developments, which makes our work challenging. We also must learn faster. That gives us the motivation to look forward and do more.

Tegshbayar (Tegshee) Darambazar advises and supports the governance and anticorruption work of government offices, civil society, and international organizations in Mongolia. With a background in law, Tegshee has previously served in the secretariat of the national committee on gender equality. She has also served in the Prime Minister’s office as an analyst and as an adviser on introducing compliance regulation to commercial banks in Mongolia and investment management companies.

Tegshee is currently working with Transparency International Mongolia as an independent consultant on government/organization transparency, judicial transparency, and anticorruption projects. She helped to inform LTRC’s ecosystem approach to beneficial ownership (BO) in Mongolia, building on her wide-ranging engagement in the country’s BO process and her understanding of the context.

Catch up on the series

• Q&A: What’s next for Mongolia’s beneficial ownership transparency and anticorruption agenda
• Q&A: A multigenerational approach to Colombia’s energy transition
• Q&A: Building trust and collaboration among mining stakeholders
• Q&A: A civic-tech approach to budget and beneficial ownership transparency in Nigeria
• Q&A: Creating shared value for sustainable development in Peru’s extractive sector