StephenAbbott
commented
2 years ago As part of ongoing research and investigation into emerging issues relating to beneficial ownership verification by the Open Ownership team, my colleagues Thom Townsend and Tymon Kiepe have just published a blog post looking at the verification mechanism of the new Register of Overseas Entities in the United Kingdom which "applies to overseas entities that want to buy, sell or transfer property or land in the UK, and will also apply retrospectively to varying degrees in England and Wales, and Scotland":
[This ticket helps track progress towards developing a particular feature in BODS where changes or revisions to the standard may be required. It should be placed on the BODS Feature Tracker, under the relevant status column.
_See Feature development in BODS in the Handbook._
The information in this first post on the thread should be updated as necessary so that it holds up-to-date information. Comments on this ticket can be used to help track high-level work towards this feature or to refine this set of information.]
Feature name: Verification of beneficial ownership information
Feature background
What user needs are met by introducing or developing this feature in BODS? [Summarise these needs. Link to user stories, reports, blogs and other evidence where possible. Or add user stories here directly.]
Verifying beneficial ownership data and keeping it up-to-date are both crucial ways to build trust in the accuracy of the data and the effectiveness of disclosure regimes. This is why Open Ownership has enshrined verification and keeping data up to date and auditable in our Principles for Effective Beneficial Ownership Disclosure.
In May 2020, Open Ownership produced a policy briefing on the verification of beneficial ownership data setting out how verification “is the combination of checks and processes that a particular disclosure regime opts for to ensure that the beneficial ownership data is of high quality, meaning it is accurate and complete at a given point in time”. The briefing sets out how a range of checks are more achievable with well-structured beneficial ownership data including those carried out at the point of submission and after submission.
Open Ownership’s response to the Financial Action Task Force (FATF) consultation on revisions to Recommendation 24 and response to BEIS consultation on Corporate Transparency and Register Reform from 2019 repeatedly emphasise the importance of verifying beneficial ownership data with our BEIS response going so far as to say “without verification, the potential of beneficial ownership data as an anti-money laundering tool will be lost”.
In later responses submitted to the UK government's Corporate transparency and register reform: powers of the registrar consultation which ran in 2020/2021, Open Ownership welcomed plans to give the registrar greater powers to query and remove information from the Companies House register including the information collected and published on persons of significant control. Open Ownership also welcomed proposals to strengthen the verification of personal identification documents for those listed as corporate directors although we expressed reservations about the challenge of conducting such checks on foreign entity corporate directors.
Toward the end of 2021, FATF revealed its proposed revisions to Recommendation 24 on beneficial ownership and carried out a public consultation. The proposed revisions would strengthen FATF's guidance around countries and timely access to adequate, accurate and up-to-date beneficial ownership information. Specifically, FATF's draft text sets out that:
These revisions are due to be discussed at FATF meetings in February 2022.
In 2019, the Tax Justice Network produced a paper titled ‘Beneficial ownership verification: ensuring the truthfulness and accuracy of registered ownership information’ setting out the importance of ensuring the accuracy and validity of beneficial ownership information as well as providing international case studies for how a variety of countries are starting to address tackling these issues.
Also in 2019, FATF published their Best Practices on Beneficial Ownership for Legal Persons setting out case studies from countries including Denmark and France on how they deploy a variety of verification mechanisms, as referenced in Open Ownership's verification briefing. And that same year saw the publication of EITI's report on Legal approaches to beneficial ownership transparency in EITI countries listing legally mandated data verification mechanisms from the European Union, Ghana, Indonesia, Malawi, Peru, Ukraine, United Kingdom and Zambia.
The European Union's fifth anti-money laundering directive from 2018 states "accurate identification and verification of data of natural and legal persons are essential for fighting money laundering or terrorist financing" as well as introducing amendments to strength the focus on measures that obliged entities need to take to verify the identities of named beneficial owners.
Here are some user stories relating to verification:
What impact would not meeting these needs have?
For ownership or control, person or entity statements in BODS, it is currently possible to show that statements have been verified within BODS 0.2 by using verified in the sourceType array (see Github issue for worked example). Publishers can also provide a description for the source of the verification, a URL to the source, a retrievedAt date for when this verification information was retrieved/received and use the assertedBy array to give a name and URI for the agent providing the verification information. However, given that many beneficial ownership registers do not have built-in verification mechanisms at present, all of these fields are optional.
How important is it to meet the above needs?
Verification of beneficial ownership data is crucial to bolster trust in the data and facilitate the increased use of that information in jurisdictions across the world to achieve some of the key aims of beneficial ownership transparency. Being able to best represent and capture verification activities in structure beneficial ownership data is therefore a high priority.
How urgent is it to meet the above needs?
Further investigation, evidence gathering and work with implementers will be needed in order to understand whether the verification mechanism present in BODS 0.2 fulfils the requirements of publishers and users of beneficial ownership data or whether additional changes to BODS will be required.
Are there any obvious problems, dependencies or challenges that any proposal to develop this feature would need to address?
More investigation is needed into user requirements and needs but a challenge for the team working on BODS will be to understand whether the current approach where an entire BODS statement is marked as verified is suitable for user needs or whether a different approach is needed where publishers and data users can point to a particular field in a BODS statement which has been verified.
An open question which needs further investigation by the Open Ownership team and where we would welcome further external inputs is whether those implementing BODS and using it to provide verification information about statements would benefit from also being able to record IDs for agents (see comment on related Github issue).
Feature work tracking
[Link to proposals, bugs and issues in the repository to help track work on this feature]
See issues #16 and #271