Unmasking beneficial owners of companies to end IFFs

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Osinbajo at EITI conference on tackling corporate secrecy and revealing beneficial owners of companies
Osinbajo at EITI conference on tackling corporate secrecy and revealing beneficial owners of companies

By Racheal Ishaya

Although it is a legal requirement to submit the names, addresses and contact information of directors and owners of a company at the point of registration, this requirement for now is mere formality.

Many a time, the persons whose names appear in the registry of a company are often not the owners of such company as the beneficial owner sits in the background and just cashes out profits.

In Nigeria, many people who act as CEOs or seemingly control the highest shares of some companies are in fact not the beneficial owners of the shares they appear to be controlling.

According to the legal requirement, a true owner must be a real life human being and not another company or trust.

For companies with complicated ownership structures, involving many different corporate vehicles, the beneficial owners are the individuals who are right at the very top of the chain.

Often, no one bothers to verify whether the names listed as directors or addresses listed in the registration forms even exist. This offers ample opportunity for the unscrupulous and the corrupt to go undetected.

It is therefore conceivable that any individual or company who hides in the background and fronts another individual as the company owner is up to no good from the get go.

It is through such guise that the company owners perpetrate all manner of financial frauds, evade taxes and engage in illicit trade relations only aimed at avoiding taxes.

For a number of countries including Nigeria, unmasking beneficial owners of all companies has become a priority for the government. Little wonder the issue of beneficial owners formed a major topic for discuss at the 7th Financial Transparency Conference in Helsinki, Finland.

The conference organised by the Financial Transparency Coalition, a global civil society coalition focused on issues of Illicit Financial Flows (IFFs) and Kepa, a Finish NGO platform for global development.

The Senior Advocacy Manager, Open Contracting, Partnership, Ms Hera Hussain, argued that it was necessary to have a comprehensive definition of Beneficial Ownership.

She posited that a definition, with global application was the first step to unravelling the mystery of Beneficial Ownership to promote smarter analysis and solutions to secrecy in corporate activities.

For her, a standard definition was also important to control the narrative on what remains legal and what becomes criminal in opening and operating companies.

By and large the aim of the definition will be to determine what amounts to a lacuna in laws and what outright criminality is.

Also, Mr Juan Argibay, Coordinator for Money Laundering and Terrorist Financing in Argentina, said that Argentina had prosecuted more than 40 cases from the Panama Papers leaks.

He said that the Panama Papers was a tipping point in the battle to get countries to synergise on the issue of illicit financial flows.

He said that without effective cooperation from other countries, there was little room for recovering assets.

It is for this reasons that he canvassed for more trust between countries to share information on beneficial owners of comapnies.

In context to Africa, the Deputy Director, Tax Justice Network, Africa, Mr Jason Braganza, said that Kenya, Ghana, South Africa and Nigeria were currently leading in the fight against Beneficial Ownership

Analysts believe that for Nigeria, the fight started in 2016, at the London Anti-Corruption Summit, where President Muhammadu Buhari pledged to establish a publicly accessible register of all companies operating in Nigeria.

Recently, Vice President of Nigeria, Prof. Yemi Osinbajo at the Extractive Industries Transparency Initiative Conference in Jakarta, Indonesia said hidden corporate ownership posed serious danger to developing countries like Nigeria.

He also said that Nigeria was still grappling with the negative consequences of the use of opacity by senior members of government and their cronies between 1993 and 1998 awarding themselves juicy contracts in the extractive industry.

He said one of such incidents involving Malabu Oil and Gas had been a subject of criminal and civil proceedings in many parts of the world involving huge legal costs.

Osinbajo added that hidden ownership and other underhand business practices could erode profitability and shareholder value and that was why ownership transparency was a potential win-win for all.

Currently, the Nigeria Extractive Industry Transparency Initiative (NEITI) has already taken the lead by issuing a roadmap for implementing beneficial ownership reforms.

The roadmap for Nigeria outlined the processes, activities and timeframe for collection, verification and disclosure of beneficial owners of companies within the extractive industry.

Furthermore, the Corporate Affairs Commission (CAC), the custodian of Nigeria’s company registry, is said to be pursuing relevant amendments to the Companies and Allied Matters Act (CAMA), 1990 to comply with global standards.

Part of the expected amendments will be the strengthening of sanctions against false information and non-compliance, as well as the inclusion of a section in the company registration form where information about Persons with Significant Control (PSC), will be disclosed.

In line with the open contracting data standard, the Bureau for Public Procurement (BPP) would be expected to establish a publicly accessible registry of licensed owners of all companies operating in Nigeria and those who benefit from public sector contracts.

It is expected that these agencies would work together with the Central Bank of Nigeria, to use the Bank Verification Number (BVN) to link ownership of properties to bank accounts.

Many Analysts are of the opinion that to end corporate secrecy in Nigeria, the coordination of these reforms would be key.

They are also of the opinion that although anonymous companies are not always illegal or are not always designed to harm, they provide a convenient cover for criminal and the corrupt, therefore must be stopped.

As the discussion continues to rage, one question still remains clearly unanswered: Why would any legitimate company engaging in legitimate business and with legitimate funds chose to hide its real owners?

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