Public registry to list beneficial owners, politically exposed persons in oil sector

Nov 23, 2018 News

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By Kiana Wilburg

The local chapter of the Extractive Industries Transparency Initiative (EITI) is working towards the creation of a public registry of beneficial owners and Politically Exposed Persons (PEPs) in the oil and gas sector. This was confirmed by Head of the GY-EITI, Dr. Rudy Jadoopat.
During an exclusive interview with this publication yesterday, the official noted that the creation of the registry is an important aspect of the work of the local chapter.

According to Dr. Jadoopat, the register coincides with a requirement of the EITI Standard, which calls for the disclosure of those persons who ultimately control and receive proceeds from licences to extract a country’s natural resources. He also noted that the role of “Politically Exposed Persons” is an area of particular concern.
“Many practices can make obscure who are the true beneficial owners of a company. The use of one or more shell companies and/or proxy/nominee owners and directors are two such practices. It is therefore important to strengthen the legal framework in key areas and to ensure that information on beneficial owners are publicly accessible in registries,” Dr. Jadoopat emphasised.
He added, “It is worth noting that EITI’s interest in beneficial ownership dovetails with that of the Financial Action Task Force on Money Laundering (FATF) and its regional affiliates. Thus, there will be a degree of complementarity on this topic between Guyana’s pursuit of EITI compliance and compliance under FATF.”
Further to this, Dr. Jadoopat said that other areas of the law that are complementarily important to ensure greater disclosure are the Access to Information Act and the Integrity Commissions, which are fully functional and in order. He commented that these provide citizen groups, police and journalists with the means of accessing information that might prove critical on PEPs, such as asset declarations and published salaries.
Additionally, Dr. Jadoopat said that the Petroleum Regulations also make provisions for a body corporate, which has a shared capital to disclose the name of any person who is the beneficial owner of more than five per centum of the issued shared capital.
With Guyana’s admission as an EITI candidate country on October 25, 2017, the nation is required to publish a beneficial ownership roadmap by July 2018, with the aim of full disclosure of beneficial ownership by January 1, 2020. Dr. Jadoopat was pleased to note that the roadmap has been published.

INCREASE SCRUTINY
The oil and gas sector is prone to corruption. As such, Guyana being an emerging oil and gas producer will have to put several measures in place to safeguard the nation’s wealth. One of these systems will have to include increasing beneficial ownership screening, so as to reduce the sector’s risk to corruption.
This was recently noted by the Natural Resource Governance Institute (NRGI), an independent non-profit organization dedicated to improving countries’ governance over their natural resources. Since 2015, the institution has been providing advice to Guyana’s authorities.
The Institute noted that in most natural resource-rich countries, when a company is seeking the right to explore for or produce oil, gas or minerals, sector rules require that regulators check some basic information before granting the company a licence and accompanying contract.
In this regard, NRGI said that the regulator is supposed to judge whether the company is technically competent, financially sound, and is in compliance with environmental and safety rules. It noted, however, that licensing rules generally do not require screening of whether public sector officials have interests in an applicant company, which could create serious conflicts of interest.
The Institute said, “We reviewed over 50 mining and oil laws around the world and found that about half contained prohibitions on government officials or their close associates – often called ‘politically exposed persons’ (PEPs) – holding interests in companies applying for extractives licenses, but none required regulators to actually check whether or not such PEP interests existed as part of screening licence applications.”
It added, “This is a potentially critical gap in regulatory oversight, because a large body of real-world cases suggests that the ability to hide a company’s true beneficial owner is a major enabler of corruption in the granting of extractive rights.”
In Guyana, there is no legislation or piece of regulation, which addresses beneficial ownership screening.
On that note, NRGI has pointed out that a growing number of governments are developing legal policies and information systems for collecting and publishing data about the beneficial owners of extractives companies – the real people who own, control, or economically benefit from a company.
It stressed that these reforms range from amending company registration laws and creating national public registers to sector-specific approaches like establishing extractives transparency laws and licensing requirements.
But to have an impact, NRGI said that extractive sector reforms may need to go beyond just requiring beneficial ownership disclosure, namely by establishing rules on what types of beneficial ownership linkages will be considered unacceptable self-dealing or corruption, and by determining the consequences that will apply when that line is crossed.
Further to this, NRGI research shows that a number of countries have already established such rules, but monitoring and enforcement is lacking. Given the corruption risks, the Institute said that improving national policies and practices on allocating extractives licenses should be at the forefront of these efforts.
Going forward, NRGI said that resource-rich countries such as Guyana will need to choose beneficial ownership assessment rules that best address the political, legal and industry realities in which they award licences.
Given the relative newness of evaluating corruption risks using beneficial ownership information in licensing decisions, NRGI said that officials may want to put much of the detail into less formal documents such as guidelines, so that the rules will be easier to amend based on lessons learned.
Regardless of where rules are stipulated, NRGI commented that they should be subject to public consultation during their development, and publicly disclosed once finalized in order to facilitate monitoring and accountability.

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