Beneficial Ownership Requirements in Oil, Gas, and Mineral Resources Governance

BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP Assessing progress in meeting Requirement 2.5 Assessing progress in meeting Requirement 2.5 The global standard for the good governance of oil, gas and mineral resources.

Beneficial Ownership Beneficial Ownership What is BO according to the EITI? Req. 2.5 Req. 2.5 A beneficial owner beneficial owner in respect of a company means the natural person(s) who directly or indirectly ultimately owns or directly or indirectly ultimately owns or controls controls the corporate entity this must reflected reflected in MSG definition of BO MSG definition of BO. natural person(s) must

Beneficial Ownership Beneficial Ownership Elements of the EITI definition Natural person(s): Natural person(s): a human being company (never a company / other legal entity, or a nominee/proxy). human being who owns or controls the Ownership or control Ownership or control: means of owning or controlling means of owning or controlling a company, e.g. shares, voting rights, other decision/veto rights, right to profit, contractual associations, joint ownership arrangements. Ownership thresholds Ownership thresholds: : a percentage threshold can be considered can be considered control or ownership control or ownership percentage threshold that defines what what P Politically olitically exposed person (PEP): exposed person (PEP): an individual entrusted with a prominent public function prominent public function. individual who is or has been

Requirement 2.5 Requirement 2.5 Beneficial Ownership Beneficial Ownership By 1 January 2020 1 January 2020 all EITI countries have to ensure that companies that apply for ensure that companies that apply for or hold a participating interest hold a participating interest in an oil, gas or mining license or contract or contract in their country disclose their beneficial owners disclose their beneficial owners (BO)

Requirement 2.5 Requirement 2.5 Beneficial Ownership Beneficial Ownership a) It is recommended that implementing publicly publicly available available register register of of the entity(ies) that apply for or hold a participating interest in an exploration or production oil, gas or mining license or contract ( ) implementing countries the beneficial beneficial owners countries maintain owners of the corporate maintain a a c) As of 1 1 January request, request, and information information. This applies to corporate entity(ies) that apply for or hold a participating interest in an exploration or production oil, gas or mining license or contract and should include the identity(ies) of their beneficial owner(s), the level of ownership and details about how ownership or control is exerted January 2020 and companies companies publicly 2020, , it it is is required publicly disclose, required that disclose, beneficial that implementing implementing countries beneficial ownership countries ownership

Current assessments Current assessments 1 1 January January 2020 2020 Until January 2020 Until January 2020: Validations have provided an overview on overview on BO BO transparency in the countries, but have not assessed progress assessed progress on meeting the requirement. From January 2020 From January 2020: Validation is expected to expected to document document whether BO has been BO has been disclosed disclosed in accordance with provisions 2.5.c have not 2.5.c- -f f.

Timeline and framework Timeline and framework for assessing compliance of Req. 2.5 Assessment of BO disclosure will follow agreed Validation schedule Validation schedule. Exception Exception: countries that have reach overall satisfactory progress in 2019 satisfactory progress in 2019 will be validated validated on Requirement 2.5 on 1 on Requirement 2.5 on 1 January 2021 January 2021.

Timeline and framework Timeline and framework for assessing compliance Agreed validation validation schedule schedule for LAC* Upcoming Upcoming Validations Validations in LAC 24 October 2019 (first) 25 April 2020 (first) 25 April 2020 (first) 17 June 2020 (third) Trinidad & Tobago Colombia Argentina in LAC Suriname Guyana Mexico Peru 27 August 2020 (second) 29 June 2021 (re-validation) 27 August 2021 (first) *There are 3 on-going validations: Guatemala, Dominican Republic & Honduras. If any of these countries gets satisfactory progress , then it will have Req Req. 2.5 . 2.5 validated validated on on January January 2021 2021.

Timeline and framework Timeline and framework for assessing compliance Assessment Assessment of of 2 2. .5 5: : similar effect on the overall level of progress as any other requirement below below satisfactory satisfactory progress progress in in implementing 2 2. .5 5 would prevent prevent an an overall satisfactory progress (SP). assessment assessment implementing Req overall assessment of Req. . But assessment assessment will December December 2021 would lead to satisfactory progress . After that, for having an overall assessment of SP, it will be needed to comply fully with Req. 2.5 will be implementing the be phased phased until 31 the initial initial criteria 31 2021, implementing criteria

Timeline and framework Timeline and framework for assessing compliance 1 1 January January 2020 Validations and affect their overall outcome. 2020 Req Req. . 2 2. .5 5 will be assessed in all Phased Phased approach assesing Req. 2.5 approach: there will be two two stages stages for 31 31 December December 2021 2021 Initial Initial Criteria Criteria ( (Phase Phase 1) 1) Full Full Criteria Criteria ( (Phase Phase 2) 2)

Phased approach Phased approach Assessment of Req. 2.5 to consist of two parts: Technical Technical Assessment Assessment Assessment Assessment of of Effectiveness Effectiveness Have the different elements of the requirement the requirement been fully implemented implemented (2.5.a-g)? Until 31 December 2021, focused on a limited set of limited set of questions questions. elements of fully Has the objective been met? met? Complements the technical assessment. Focuses on reasons reasons behind significance of gaps, data accessibility accessibility. Based on the MSG s MSG s work stakeholder stakeholder consultations consultations and FATF assessments Provides relevant relevant recommendations objective of the requirement behind gaps data quality quality, data gaps, the data work, FATF recommendations

Implications for overall assessment Level of Level of progress progress Phase 1 Phase 1 Initial Criteria Initial Criteria (1 Jan 2020 (1 Jan 2020 31 Dec 2021) Phase 2 Phase 2 Full Criteria Full Criteria (as of 1 Jan 2022) (as of 1 Jan 2022) 31 Dec 2021) Outstanding Outstanding progress progress Not applicable. Implementation exceeds the required aspects of the requirement Implementation exceeds the required aspects of the requirement, and the assessment demonstrates disclosures are effective and systematic. Satisfactory Satisfactory progress progress Initial criteria are fully met Initial criteria are fully met, with a demonstrated focus on ensuring effective disclosures. All aspects of the requirement are fully met All aspects of the requirement are fully met. Possible omissions have been considered by the MSG and are not material. Meaningful Meaningful progress progress Significant elements of the initial criteria are Significant elements of the initial criteria are met met, and some efforts have been undertaken to promote effective disclosures. Significant elements of the requirement are being implemented Significant elements of the requirement are being implemented and the implementing country has made efforts to ensure effective disclosures. Inadequate Inadequate progress progress Significant elements of the initial criteria are Significant elements of the initial criteria are unmet unmet. Significant aspects of the requirement are unmet Significant aspects of the requirement are unmet, and effective disclosures are not taking place. No progress No progress No progress No progress in implementing the initial criteria. No progress No progress in implementing the requirement.

Phased approach Phased approach Why dividing the technical assessment? Given progress progress roadmaps roadmaps assessments assessments of of progress be be crucial crucial for taking stock of progress and identifying identifying the the next next steps disclose beneficial owners. the challenges challenges implementing date, progress on and and limited limited the likely likely Req. . 2 2. .5 5 will in in BO the the will to it is on Req steps needed to

Phased approach Phased approach Why dividing the technical assessment? There will be two two stages stages for assesing Req. 2.5 Countries Validation and further improve reassessment. can benefit benefit from from improve BO recommendations recommendations BO disclosures disclosures before from Initial criteria sets concrete for future assessment feedback of implementation and full implementation). concrete expectations expectations, clear feedback on clear framework framework on gaps gaps (current level By 1 1 January aspects aspects of of the January 2022 the requirement requirement are met. 2022, validation would expect that all all

Technical assessment Technical assessment Components for assessing compliance Laws, Laws, regulations regulations or or policies Documented Documented MSG s MSG s discussion Request Request of of BO BO public weaknesses weaknesses in disclosures - reliability and materiality of omissions ( (2 2. .5 5. .c) c) Details Details of of the the identity identity of of BOs BOs - nationality, country of residence, identification of PEPs ( (2 2. .5 5. .d) d) Approach Approach established established by by MSG MSG for companies to to assure ( (2 2. .5 5. .e) e) MSG MSG definition definition of of BO BO and requirement for publicly disclose disclose stock stock exchange exchange ( (2 2. .5 5. .f) f) Disclosure of legal legal owners owners and share of ownership ( (2 2. .5 5. .g) g) policies for a public register of BO ( (2 2. .5 5. .a) a) discussion on disclosure of BO ( (2 2. .5 5. .b) b) public disclosure disclosure, and MSG s MSG s assessments assessments of of gaps gaps or or assure accurate accurate information information publicly listed listed companies companies to

Phase 1 Phase 1 Initial criteria (2020-2021): Assessment will focus on a limited set of questions Existence of laws/regulations/policies laws/regulations/policies t to establish maintain maintain a public public register register of of BO Has the MSG MSG agreed agreed on a definition with with requirement requirement and international international norms thresholds thresholds and reporting reporting for EITI EITI report report? MSG s discussion discussion on BO disclosure and assessment gaps gaps and and weaknesses weaknesses (including materiality of omissions and reliability of information). Plan challenges? limited set of questions (1/2): establish and and BO. . definition of of BO norms? Does it include for PEPs PEPs? Is it referenced referenced in the BO? Is it aligned aligned assessment of of Plan for for overcoming overcoming these

Phase 1 Phase 1 Initial criteria (2020-2021): Assessment will focus on a limited Request Request of BO information to be publicly by legal legal framework framework, and disclosure Does the information include level exerted exerted, details of identity there an approach approach for companies to assure information? For publicly publicly listed listed companies companies, is there a reference stock stock exchange exchange? set of of questions questions (2/2): publicly disclosed disclosed, support disclosure by by companies companies. level of of ownership ownership, how identity, and identification of PEPs assure accuracy limited set support how it it is is PEPs? Is accuracy of the reference to to the the

Phases 1 & 2 Phases 1 & 2 Elements of Elements of Requirement 2.5 Requirement 2.5 Public register of BO Public register of BO - - 2.5.a 2.5.a Phase 1 Phase 1 Initial Criteria Initial Criteria (1 Jan 2020 (1 Jan 2020 31 Dec 2021) Existence of laws/regulations/policies laws/regulations/policies to establish and maintain establish and maintain a public register of BO. Phase 2 Phase 2 Full Criteria Full Criteria (as of 1 Jan 2022) (as of 1 Jan 2022) BO public registry. 31 Dec 2021) Existence of BO public registry Documenting Documenting of government s policy and MSG s discussion on BO disclosure (legal provisions, practices & reforms). [Same as Phase 1] [Same as Phase 1] Government s policy & Government s policy & MSG s discussions MSG s discussions - - 2.5.b 2.5.b Request of BO information Request of BO information, support by legal framework, and disclosure by (any/some) companies. MSG s assessment assessment of gaps/weaknesses; gaps/weaknesses; plans to overcome challenges. Disclosure by all companies Disclosure by all companies (identities, level of ownership & details on how ownership/control is exerted). MSG s assessment assessment of gaps/weaknesses; naming naming of non non- -compliers compliers; plans for addressing this & strengthening system. Request and disclosure of Request and disclosure of BO information; gaps & BO information; gaps & weaknesses weaknesses - - 2.5.c gaps/weaknesses; 2.5.c Inclusion of identity details in requested identity details in requested information information (nationality, country of residence, and identification of PEPs). Inclusion of identity details in disclosed information identity details in disclosed information (nationality, country of residence, and identification of PEPs). Information about the Information about the identity of the BO identity of the BO - - 2.5.d 2.5.d Establishment by government/MSG of an Establishment by government/MSG of an approach approach for participating companies to assure the accuracy of BO information. accuracy of BO information. MSG agreement on appropriate BO definition agreement on appropriate BO definition (reference in EITI Report). Disclosed of stock exchange for publicly listed companies exchange for publicly listed companies (in public register or EITI Report). Compliance by participating companies Compliance by participating companies with the established approach for accuracy of BO information. approach for accuracy of BO information. Assurances on the Assurances on the accuracy of information accuracy of information - - 2.5.e 2.5.e BO BO definition definition, , disclosure for for publicly publicly listed listed companies companies & & joint ventures ventures. . - - 2.5.f 2.5.f [Same as Phase 1 for definition]. [Same as Phase 1 for definition]. MSG considerations on the stock exchange requirements stock exchange requirements regarding BO information. Disclosure of BO Disclosure of BO related to joint ventures ventures. disclosure stock joint joint Public availability Public availability of information about legal information about legal owners owners and share of ownership. [Same as Phase 1] [Same as Phase 1] Disclosure Disclosure of of legal owners owners. . - - 2.5.g legal 2.5.g

Assessment of Effectiveness Assessment of Effectiveness To establish an overview of whether disclosure disclosure is is addressing addressing the the effectiveness assessment will draw on findings from: whether implementation implementation of of BO the overall overall objective objective of of Req BO Req. . 2 2. .5 5, Req. 2.5. technical FATF FATF mutual mutual evaluations Documentation of MSG Stakeholder Stakeholder consultations technical assessment assessment, evaluations, MSG work, consultations Risk Risk- -Based Based Approach Approach work,

Assessment of Effectiveness Assessment of Effectiveness Risk-based approach Importance of data verification, format and accessibility. Target the most relevant omissions: most relevant omissions: if the implementing country has undertaken sufficient measures measures to ensure that BOs of high BOs of high- -risk companies are disclosed; disclosed; if these companies have complied these companies have complied with disclosure requirements; if the ownership thresholds ownership thresholds for disclosing BO are appropriate appropriate and provide recommendations recommendations. sufficient risk companies are

Assessment of Effectiveness Assessment of Effectiveness Relevant elements Comprehensiveness Comprehensiveness of information is an imperfect measurement measurement of the effectiveness of disclosure. Ensuring reliable reliable data data from from high owned by PEPs) is is central central for meeting the objective. MSG s MSG s assessment assessment of of gaps gaps and (and the reasons behind them) plays a k key Document strengths strengths & & weaknesses weaknesses in data imperfect high- -risk risk companies companies, (eg: and weaknesses weaknesses in in data data ey role role data reliability reliability

AUTHOR AUTHOR Catherine Greene DATE DATE 1 August 2019 OCCASION OCCASION Beneficial Ownership: Road to 2020 E E- -MAIL MAIL cgreene@eiti.org PHONE PHONE +47 22 20 08 00 ADDRESS ADDRESS EITI International Secretariat, Rusel kkveien 26, 0251 Oslo, Norway www.eiti.org @EITIorg