Creation of online beneficial ownership register (AL0066)

What is the public problem that the commitment will address? A beneficial owner is the real person or real people who own, control or benefit from a legal entity, such as a company or organization. Criminals can use an ‘anonymous owner’ or a ‘nominee’ as owner of a company in order to secretly move, launder and spend money from criminal activity. Often these secret companies are used to pay or receive bribes or engage in other corrupt practices or to avoid taxes. When open registries require legal entities to disclose the individuals who own or control the legal entity, through direct ownership or indirect ownership through shares for example, money is more easily traceable. Therefore, it becomes more difficult to use legal entities to hide the profits from corruption and crime and therefore, reduces the attractiveness and ease of engaging in such criminal activity. In Albania only the Law no. 9917/2008 ‘‘On the prevention of money launderingand terrorist financing’’ has included explicit mention of beneficial ownership. The legal entities under the jurisdiction of this law are obligated to identify the beneficial owners of their customers; however, this data has not been recorded in a designated national register. Furthermore, under current legislation legal entities registered in the Republic of Albania are not obligated to identify and register data on their beneficial owners in a designated national register.Thus, there has lacked the legal framework necessary to require by law the disclosure and register of beneficial owners of legal entities. Furthermore, without the adequate establishment of procedures and manner of registration and storage of the beneficial ownership data or the punitive measures for non-registration of beneficial ownership, criminal activity and corrupt practices can more easily be hidden.

What is the commitment? This commitment outlines the pathway to establishing a functioning central register of beneficial owners in order to reduce the opportunities for hiding corruption and criminal activity and its profits. Through the development, approval and implementation of the law “On the Register of Beneficial Owners” (the UBO Law) and by-laws that explicitly define beneficial ownership, outline the requirements of legal entities to report to the register and the rules and procedures for the register itself the commitment establishes the legislative basis necessary for an effective beneficial ownership register. The implementation of the register of beneficial owners will consist of an electronic database held by the National Business Center (NBC). All legal entities required to report and register their beneficial owner information will be obliged to submit information regarding their beneficial owners as outlines by the UBO Law or face financial sanctions for non- Commitments | Open Government in the Fight against Corruption |Commitment 2 compliance.Thus, through this initiative, transparency regarding the real ownership and control of legal entities will be promoted and provided, as well as more data to which the public may have access. Objective: The drafting of the law “On the Register of Beneficial Owners” and the accompanying by-laws through a consultative process with stakeholders aim to establish the manner and procedures of data registration for beneficial ownership that accounts for the technical and operational challenges of identifying beneficial owners in Albania. The implementation of the register through this framework aims to establish a system that promotes transparency, due diligence and ethical practices and severely reduces the opportunities for money laundering, bribery, tax evasion and other forms of corruption. Expected results: • Approval of the draft law ‘Register of Beneficial Ownership’; • Drafting and approval of the bylaws: -“On determining the manner and procedures of data registration for beneficial ownership, as well as the notification from the competent state authorities and from the obligated subjects”; -“On determining the rules for the functioning of the Register of Beneficial Ownership, on the way of communication in electronic form and exchange of data between the National Business Center and responsible state bodies, as well as for the manner and terms of communication between the Register of Beneficial Ownership, the Trade Register and the Register of Non-Profit Organizations” • Implementation of the Law on the Register of Beneficial Ownership; • Creation of the Register of Beneficial Ownership by the end of 2021.

How will the commitment contribute to solving the public problem? In order to meet the 'Beneficiary Ownership' objective, MoFE efforts have focused on adapting the necessary legal basis. The Law no. 112/2020 "On the register of beneficial ownership"(milestone 1), fulfils one of the recommendations of MONEYVAL. The law partially approximates Directive (EU) 2015/849 of the European Parliament and of the Council, dated 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC.This law regulates the definition of the beneficial ownership; the obligated entities which must register the beneficial owners; the creation, functioning and administration of the Register of Beneficiary Ownership; the procedure and the manner of registration and storage of the registered data of the beneficial ownership as well as the punitive measures in case of non-registration of the beneficial ownership. More specifically, this law applies to the reporting entities, legal entities registered in the Republic of Albania according to the provisions set in the law. The register will be set up and managed by the National Business Center and will be accessed only by the persons authorized to represent the reporting entity and bythe competent state authorities. Any person wishing to obtain information from the register that is not freely accessible and public can only do so if they are able to prove that they have a legitimate legal interest in obtaining this information. Another task derived by legislative base adaption is the drafting of bylaws, which will be realized with the financial and technical assistance of GIZ, specifically: the DCM “On determining the manner and procedures of data registration for beneficial ownership, as well as the notification from the competent state authorities and from the obligated subjects” (milestone 2) and the DCM “On determining the rules for the functioning of the Register of Beneficial Ownership, on the way of communication in electronic form and exchange of data between the National Business Center and responsible state bodies, as well as for the manner and terms of communication between the Register of Beneficiary Owners, the Trade Register and the Register of Non-Profit Organizations” (milestone: 3) , are in the drafting process. Finally, the Ministry of Finance and Economy and the National Agency for the Information Society must establish the Register of Beneficial Ownership until 2021 (milestone 4). OGP challenge affected by this measures Improve public services Increase efficient management of public resources Increase public integrity Increase corporat e accountability Create a safer community for citizens & civil society ☒ ☐ ☒ ☒ ☐

Why is this commitment relevant to OGP values? Transparency & Access to Information • Does the ide a disclose more information to the public? • Does the ide a improve the quality of information disclosed to the public? • Does the ide a improve accessibility of information to the public? • Does the ide a e nable the right to information? ☒Y es ☐N o The creation of the Register for Beneficial Ownership is foreseen to function as a state electronic databa se, in which the data of the beneficial ownership of the subjects obligated to report is registered, which collects in r eal time the data registered in the respect iv e state registers, administer ed by the relev ant state in stitutions, and serv es as an official electr onic archiv e, thus en suring transparency in the field of ben eficial owners. Public Accountability • Does the idea create or improve rules, re gulations, and me chanisms to publicly hold governme nt officials answerable to the ir actions? • Does the ide a make the government accountable to the public and not solely to inte rnal syste ms? ☒Y es ☐N o By ensuring transparency in the field of beneficial ownership and the definition of the institutions in charge of data registration and their administration, a s well as all other institutions responsible for fulfilling of the resulting legal obligations, aims to improv e public accountability . Public & Civil Participation • Does the idea create or improve opportunities, or capabilities for the public to inform or influe nce de cisions? • Does the ide a cre ate or improve the e nabling e nvironme nt for civil socie ty? ☐Y es ☒N o Any person may obtain information about the data recorded in the register, which is not freely accessible and pu blic, only if he proves that he has a legitimate interest in obtaining this information. Technology & Innovation • Will te chnological innovation be used in with one of the othe r three OGP values to advance participation, transpare ncy or accountability? ☒Y es ☐N o The use of an electronic register provides a means to ensure traceability and transparency and a verifiable record to hold public insti tutions responsible for fulfilling their obligations for the maintenance and continu ous and accurate u pdate of the register.

Milestone Activities Milestones Indicators Responsible Institution / s New or Continued Idea Timeframe Measurable & verifiable achievements to accomplish this objective Result Indicators Output Indicators Lead Responsible Institution Supporting / Coordinating Agencies / Institutions New or continued from 2018- 2020 OGP AP Start Date End Dat e Priority Measure 1: Approval of the draft law “Register of Beneficial Ownership” Milestone 1: Approval of the draft law “On the register of beneficial ownership” Drafting, consulting with stakeholders and following the procedures of the approval of the draft law N o. of working grou p meetings. Law approved Ministry of Finance and Economy (MoFE) Line Ministries ☐N o ☒Y es Beneficiary Owners Jan. 2020 Dec. 2020 Priority Measure 2: Implementation of the Law on the Register of Beneficial Ownership Milestone 2: Drafting and approval of bylaw: - DCM “On determining the manner and procedures of data registration for beneficial ownership, as well as the notification from the competent state authorities and from the obligated su bjects” Drafting, consulting with stakeholders and following the procedures of the approval of the draft law Adopted bylaw MoFE Line Ministries ☐N o ☒Y es Beneficiary Owners Jan. 2020 Dec. 2021 Milestone 3: Drafting and approval of bylaw: DCM “On determining the rules for the functioning of the Register of Beneficial Ownership, on the way of communication in electronic form and exchange of data between the National Business Center and responsible state bodies, as well as for the manner and terms of communication between the Register of Beneficial Ownership, the Trade Register and the Register of N on-Profit Organizations” Drafting, consulting with stakeholders and following the procedures of the approval of the draft law Adopted bylaw MoFE Line Ministries ☐N o ☒Y es Beneficiary Owners Jan. 2021 Dec. 2021 Milestone 4: Creation of the register of Beneficial Ownership. Drafting, consulting with stakeholders and following the procedures of the approval of the draft law Register of beneficial ownership created MoFE NBC, Line Ministries ☐N o ☒Y es Beneficiary Owners Jan. 2021 Dec. 2021

Action Plan Review

Commitment #2: Beneficial ownership register

●      Verifiable: Yes

●      Does it have an open government lens? Yes

●      Potential for results: Substantial

(Ministry of Finance and Economy)

For a complete description of the commitment, see Commitment 2 in the action plan.

Context and objectives

This is the first time that a commitment introducing a beneficial ownership register has appeared in an Albanian OGP action plan. Implementation of the commitment would fulfil a recommendation from MONEYVAL on introducing mechanisms to ensure information on beneficial ownership is accurate, up-to-date, and available to public authorities. [26] Albania has made a high-level political commitment to work with the Financial Action Task Force (FATF) and the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) to strengthen efficacy of its anti-money-laundering regime since February 2020, including implementing a register of beneficial owners. [27]

Money laundering and terrorist financing risks are still high in Albania, despite recent progress on addressing deficiencies in technical compliance with MONEYVAL’s mutual evaluation report. [28] Beneficial ownership information is currently decentralized, meaning that authorities have to first establish which financial institution might hold data on specific entities before trying to gain access. [29] A centralised register, which is current and accurate, would therefore tackle this problem. However, nongovernmental activists are sceptical about whether a register alone can tackle tax evasion, money laundering, or organised crime involving domestically operating companies that are registered overseas, particularly in tax havens. [30]

There is no evidence of civil society consultation on this commitment during development of the action plan. During this review, the IRM could not connect with Albanian civil society working on beneficial ownership to determine the commitment’s potential, opportunities, or challenges.

The commitment seeks to draft and pass a law, and subsequent by-laws, that establish a central beneficial ownership register and the necessary framework. However, a law on a beneficial ownership register was passed in July 2020 (and entered into force a month later), before this action plan was published. [31] The law defines a beneficial owner as having at least a 25% ownership stake, and who to record as the beneficial owner when it has not been possible to identify a beneficial owner. [32] It establishes free and open access to the name and surname of the beneficial owner, their citizenship and birth year and month, the date determining the individual as a beneficiary owner, and the type and percentage of ownership. [33] The data can be downloaded automatically once users are logged into the e-Albania website. [34] Access to more detailed information (e.g., the ID or passport number, or expiry date) requires a legitimate interest, meaning a person authorised to represent the reporting entity or competent state authorities would need to request the information from the National Business Centre. [35]

According to the law, the register would be created no later than 31 January 2021, and the deadline to provide updated data is extended to 30 June 2021. [36] The commitment should increase transparency of information by the end of the implementation period. A public register addresses some MONEYVAL concerns regarding Albanian authorities accessing beneficial ownership information and using that data to tackle money laundering and terrorist financing.

Potential for results: Substantial

Before this action plan, beneficial ownership information in Albania was not centralised or collected by public authorities. Public authorities in Albania could only access beneficial ownership information by first establishing which financial institution the legal person or arrangement had a business relationship with, and then approaching that institution for information. [37] In 2019 for example, 232 cases of money laundering were referred to prosecutors but there were only 8 cases with final convictions for money laundering. [38] Creating a centralised register of beneficial owners that is updated regularly and includes sanctions for inaccurate information [39] could make it easier for citizens, civil society, and public authorities to determine the real beneficial owners of legal entities. This could facilitate the prevention and detection of money laundering and other similar corrupt activities enabled through secret financial ownership, and even increase the number of investigations and convictions.

Fully implementing a beneficial ownership register may lead to Albania coming off the FAFT “grey list” of countries, designated as such due to strategic deficiencies in countering money laundering, terrorist financing, and proliferation financing. [40]

Opportunities, challenges, and recommendations during implementation

As this is the first beneficial ownership register in Albania, it is a blank slate to develop the register along international standards like the Open Ownership Principles [41] and the Beneficial Ownership Data Standard. [42] These principles state that public access to such a register should not include obstacles like payments, identification, or registration. Albania must ensure that the legal obligation for openness is implemented without obstacles like requiring registration.

In that sense, the implementation period is an opportunity to address the register’s specifications, which are not yet determined. It is essential that data is accurate, up-to-date, and interoperable with other government processes such as procurement. This would require the National Business Centre (NBC), which will manage the register, to have the resources and mandate to verify the data and impose sanctions for non-compliance. According to an NBC representative, the accuracy and veracity of data and accompanying documents in the register is borne by the reporting entities and the persons authorized to make the registration. Sanctions for not updating the register with beneficial ownership information would lead to $5,000 USD fines. [43] However, it is unclear that data veracity would be proactively checked and opens the possibility of unverified and therefore inaccurate data in the register.

Furthermore, the register could be more effective if the government also addressed if and how the register may be used to root out corruption in government processes such as procurement. There are actions that can be taken to deal with this. For example, Denmark automatically checks data against other datasets, such as the civil register, to ensure that false or deceased persons are not registered, and it conducts hundreds of random data checks every year. Ukraine has proposed a system which would automatically check beneficial ownership data against tax payments to spot potential inconsistencies or evasion of beneficial ownership data. [44] There are also mechanisms that can be used before data is submitted. In Belgium, data such as birthdates can only be registered in certain formats to ensure comparability. [45] These rules can be enforced with sanctions such as in Slovakia where third parties like lawyers or financial institutions are responsible for the accuracy of the data submitted and liable to sanctions if the information is incorrect. France not only applies financial sanctions but incorrect data can also lead to limitations on business activities. [46] The IRM makes the following implementation recommendations to improve the potential for results:

• Legal and/or technological mechanisms should be put in place to ensure that the data submitted to the beneficial ownership register is accurate, up-to-date, and compatible with other databases. Beyond ensuring that submitted data is accurate and compatible with other databases or processes (such as procurement), this can give the National Business Centre the mandate to verify data accuracy.
• The National Business Centre should be resourced to ensure that they can successfully verify data that is submitted to the register. Alongside the ability to impose sanctions for not keeping information current, the NBC should also be empowered to impose sanctions for inaccurate or incorrect data submitted.
• Data from the open beneficial ownership register should be downloadable without administrative obstacles such as having to log in to the e-Albania platform. The principle of public access to beneficial ownership registers outlines the need for data to be accessible without barriers such as payment, identification, or registration, and that the use of “legitimate interest” be limited so that the register does not become a closed register in practice. [47]

Results Report

Commitment 2. Beneficial ownership register

• Verifiable: Yes

• Does it have an open government lens? Yes

• Potential for results: Substantial

• Completion: Complete

• Did it open government? Marginal

Commitment 2: Beneficial ownership register

Ministry of Finance and Economy (MFE)

Context and objectives

This commitment was aimed at passing a law and by-laws for a central beneficial ownership register as part of Albania’s anti-corruption strategy. By ensuring that beneficial ownership information is accurate, up-to-date, and available to public authorities, the implementation of this commitment would fulfil a recommendation from the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL). The establishment of a beneficial ownership register is also in line with Albania’s high-level political commitment to work with the Financial Action Task Force (FATF) and the Committee of Experts on Evaluation of MONEYVAL to strengthen the country’s anti-money-laundering regime. [28]

Did it open government? Marginal

The commitment had four milestones, the first of which was completed in August 2020 following the parliament’s approval of the Law on the Register of Beneficial Ownership. [29] It mandates the publication of freely accessible beneficial ownership data which include information such as name, surname, citizenship, and other basic information. Amendments to the Law in 2022 increased the maximum penalties for failure to register from 500,000 ALL to 600,000 ALL (approximately 5,000 EUR) [30] and the number of entities required to register, and introduced the requirement for simultaneous registration of ultimate beneficial owners. [31]

Milestones 2, 3 and 4 were also completed. [32] The MFE created an inter-institutional subgroup that reviewed laws and international best practices to suggest recommendations for Albania’s Register of Beneficial Owners (RBO). [33] On 24 December 2020, The Council of Ministers adopted Decisions No. 1088 [34] and No. 1090 [35] on the functions of the register and the publication of data as well as the specification of entities that are obligated to register, registration timeframe, responsible actors who should register and update their information, and the rules for electronic communication and data exchange. Along with the RBO Law, these decisions regulate data verification and impose sanctions for non-compliance.

The register was introduced on 1 February 2021 and is available on the National Business Center website qkb.gov.al, which lists the legal obligations for registering and refers to the sanctions prescribed in the law. [36] Upon inspection, the IRM researcher was able to browse the register by reporting entities and status of registration application without having to create an account, provide any identification, and/or paying a fee. In other words, anyone can download a simple excerpt of current registration data and a historical excerpt that contains last date of data registration, name and surname of beneficial owner(s), citizenship, year and month of birth, date of establishment of an individual as a beneficial owner, as well as type (direct/indirect) and percentage of ownership.

The government self-assessment report disclosed that there are additional data of beneficial owners in the RBO that are only available for certain state authorities and authorized persons. [37] The number and percentage of companies and non-profit entities that registered their beneficial ownership information also saw consistent growth throughout the action plan implementation period. In March 2022, the figures stood at 96% (companies) and 86% (non-profit entities). [38] In December 2022, the figures increased to 97% (companies) and 98.5% (non-profit entities). [39] In June 2023, these figures were reported to be at 40,797 of 41,823 companies (97.5%) and 2,385 of 2,517 non-profit entities (94.8%). [40]

The high percentage of registered companies and non-profit entities demonstrated that the commitment implementation had achieved some early success. However, according to Partners Albania, many data in the register are incomplete, inaccurate, and inconsistent. [41] In addition to higher level of accuracy in the information provided by non-profit entities compared to companies, many company shareholders data were missing, although more detailed information about owners is available on the business register. In its 2023 Peer Review Report on Exchange of Information on Request in Albania, the Organization for Economic Co-operation and Development (OECD) underlined the need for adequate, accurate, and up-to-date RBO data. [42]

Partners Albania also expressed concerns about overly complex procedures for new or remote organizations, duplicate registrations of beneficial owners, and disproportionate effect of the fines if imposed on non-profit entities, which could lead to the shrinking of civic space. The MFE extended the deadline to register beneficial ownership information to 30 June 2022 and decided to pardon or reimburse entities that had not registered by the previous deadline. [43] As such, there is no evidence to assess the effect of the sanctions yet.

Prior to this commitment, Albania did not have a central beneficial ownership register. [44] Only public authorities were permitted to establish which financial institutions held information on a person of interest and request data from them. The EC commented that the RBO has improved access to information of economic actors and implements a key requirement of the EU’s anti-money-laundering directive. [45] However, the FATF still lists Albania as a jurisdiction with deficiencies in combatting money laundering and terrorist financing. [46]

While most entities have registered to the RBO, this commitment contributed marginal early results as the RBO data are not necessarily adequate, accurate, and up-to-date. This limits the effect of the register in having substantially improved beneficial ownership transparency and accountability or be used to combat money laundering and terrorist financing.

Looking ahead

Albania’s next action plan for the 2023–2025 period contains a commitment aimed at improving the registration process for beneficial owners on the RBO. [47] Even though Decisions No. 1088 and 1090 set out mechanisms to ensure data accuracy, CSOs have pointed to issues with ensuring data accuracy in practice. To overcome this, authorities could, for example, introduce sanctions that exclude participation in public procurement bids for entities that knowingly provide inaccurate data to the RBO. Furthermore, the government could also prioritize developing procedures for verifying data on the RBO. Experiences of other OGP countries such as Denmark and the Slovak Republic in verifying beneficial ownership data upon submission as well as enabling the public to report suspicious data could be used as references. [48]