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Wanted: A champion for beneficial ownership transparency

Michael Barron, Laura Keen, Tim Law   |   October 28, 2021   |   Comments

[Editor’s Note: This post was developed as part of Leveraging Transparency to Reduce Corruption (LTRC), a joint initiative of Results for Development’s Accountability and Citizen Engagement practice and the Brookings Institution’s Governance program. Access the Mongolian translation here.]

Mongolia is in need of a champion. Specifically, it needs someone to spur the next stage of its journey to achieve transparency of the ultimate owners of companies in the mining sector and wider economy. This practice, known as beneficial ownership transparency, allows citizens to know who controls or profits from a company.

In Mongolia, where mining accounted for 24% of GDP in 2019, citizens are entitled to know who really owns the companies that invest in, explore and extract the country’s mineral resources, as well as the companies in the mining industry’s supply chain.

Mongolia has made important strides toward beneficial ownership transparency. In 2020, Mongolia’s corporate registrar, the General Authority for State Registration (GASR), implemented a legal requirement on all companies to identify and report their beneficial owners. By the deadline of December 31, around 30,000 companies had reported their ultimate owners.

However, this information is currently only available to government agencies, such as regulators and law enforcement bodies.

Mongolia will take another important step toward beneficial ownership transparency when, if as expected, parliament passes amendments to the right to information law. These amendments specifically reference beneficial ownership information as one of the categories to which the public will have a right to access. Once the legal measures are in place to allow beneficial ownership transparency, there are still considerable obstacles to overcome before citizens, civil society organizations, and private sector companies have access to and can benefit from the availability of information. This is where a champion for beneficial ownership transparency can play a vital role.

A champion is needed to ensure momentum is maintained. This person can advocate for appropriate resources (time, finance, and human capacity) to ensure that both the legal amendments reach the statute book and are implemented in a timely manner. The champion should also play a leading role in building awareness in government and amongst companies and civil society of the importance of beneficial ownership transparency and the benefits of having reliable information on who is doing business in Mongolia. These benefits include understanding who is really benefiting from business activities, building trust, integrity and a more open and competitive business environment, as well as combatting conflicts of interest, corruption, fraud, and other financial crimes.

The role of a champion does not come with a standard job description and is not something you will find posted on LinkedIn. It requires a person who has stature, credibility, and a profile in public life. The person should have strong, trusting relations with government, business, and civil society and be able to influence the mobilization of both resources and views on beneficial ownership transparency. The champion could have a background in government or parliament, perhaps a former minister or senior parliamentarian. Alternatively, the champion could be a senior business leader or from civil society. The important thing is for them to have profile and influence.

Mongolia is an Extractive Industries Transparency Initiative (EITI) implementing country, which is the global standard for transparency in the extractives sector. The early days of EITI in 2003 provide an example of the positive difference that can be made by a credible champion with that profile and influence. The then CEO of the international oil company BP, Lord Browne, appreciated the benefits that EITI could bring and was an active advocate and champion of the new initiative in its early days. His credibility in the business sector, his good relations with governments, and his respect for civil society meant that his voice was heard and had impact. His support for EITI gave the initiative traction. He was able to corral support from other major oil companies in both Europe and North America. He was able to convince skeptical governments that EITI was a valuable initiative.

Mongolia needs to find its “Lord Browne” to drive beneficial ownership transparency and ensure that it makes a full contribution to creating a trustworthy and responsible business environment in the mining sector and the wider economy. Identifying such a champion could take one of several routes. A government official or parliamentarian who is already interested in the issue could demonstrate leadership and seize the opportunity of the legal amendments to advance reform. Or, an informal coalition of civil society, business, and government representatives may reach consensus on a champion and persuade that person to take on the mantle. Or, the champion may emerge from other actions. One action the government should take is to establish a taskforce to implement a public beneficial ownership register. The task force’s chair would, almost by default, become a champion for beneficial ownership transparency.

Whoever the champion is and however they are identified, there are several obstacles that the person will need to tackle to ensure a robust beneficial ownership register.

One of the key challenges is around digitization. Mongolia’s government is already committed to digitizing its services. The champion should ensure this commitment extends to beneficial ownership information. The collection, verification, storage, and dissemination of this information will be greatly facilitated by digitization. The establishment of a beneficial ownership register, including the IT component, will require funding. The champion also has an important role in securing budget. Financial support could come from public funds but also from external sources, such as an international development bank or other technical assistance provider. The champion can play a role in identifying potential sources and supporting the government in seeking such assistance.

Mongolia has not only made strides in beneficial ownership transparency, it has also addressed weaknesses in other aspects of its efforts to combat financial crimes. In 2020, Mongolia was successful in getting itself removed from the Financial Action Task Force’s so-called “grey list’ of countries requiring increased monitoring. Since that success, the focus on measures to address corruption, money laundering, and other illicit financial flows have lost some momentum.

The same should not occur with the progress the country has made on beneficial ownership. A credible champion, with profile and influence, is needed to act as an inspirational advocate for more openness about who is really doing business in Mongolia. This will go a long way to maintain momentum and cement Mongolia as a leader in beneficial ownership transparency.

To learn more about Mongolia’s path to beneficial ownership transparency, read our full report on the current state of disclosure and specific actions the country can take to move forward.

Photo © Gennadiy Kolodkin/World Bank

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