Beneficial Ownership Registry (SL0025)

• Leveraging OGP for a Transparent COVID-19 Response in Africa (November 1, 2020)

What is the public problem that the commitment will address?
In 2016, the Extractive Industry Transparency Initiative
(EITI) established a requirement that all implementing
countries, of which Sierra Leone is one, should, by 2020,
require all mining, oil and gas companies to disclose the
identity of their beneficial owners. In addition, any
politically exposed persons (PEPs) who are beneficial
owners must be identified.
Furthermore, it is worthy to note that as Foreign
Investments are pivotal to Sierra Leone’s economic
development enormous effort is being made by
government to encourage foreign investments to boost
the country’s ailing economy. Notwithstanding, there is
the ardent need to ensure that there is integrity,
transparency, accountability and prudent financial
management in all foreign investments. To ensure this,
there is the need for adequate and transparent
information to be available of the nature of all foreign
investment ventures, to ensure that they are worthy,
credible and purposeful investments. This will go a long
way to forestall the unfortunate situations that the country
has faced regarding foreign investments that have
proved to be fraudulent, masterminded by politicians for
their personal benefit and these have ended up in
companies neglecting their corporate social
responsibilities and abuse the human rights of their
workers and communities in which they have operated
with impunity with dire consequences. In view of this,
there is the need for a more proactive beneficial
information disclosure regime in all foreign investments
in the country. This is of necessity as once this is
obscure it gives room for all negative consequences
faced so far in terms of foreign investments

What is the commitment?
Beneficial Ownership disclosure or Transparency has
become a growing interest at global and national levels.
This interest not only focuses on corporate beneficial
ownership information disclosure but also seeks to
expose conflict of interest among public office holders
otherwise known as Politically Exposed Person (PEPs).
It derives from the need to trace criminals who hide their
identities behind corporate structures to defraud
countries through corruption, tax evasion, undue
favoritism, money laundering and illicit financial flows.

How will the commitment contribute to solving the public problem?
Presently Sierra Leone does not have a Comprehensive
Law on Beneficial Ownership Disclosure not a
comprehensive database of all companies operating in
all sectors. To this end the Sierra Leone Extractive
Industry Transparency Initiative conducted a Legal and
Institutional Review of Beneficial Ownership Disclosure
in Sierra Leone. Action is yet to be taken to bring this to
fruition. As it stands, this will pose a challenge even with
Sierra Leone being regarded as compliant with the EITI
requirement specified above by 2020.

Why is this commitment relevant to OGP values?
Beneficial ownership disclosure is relevant because it will
help to promote transparency and credibility of foreign
business investments. It will safeguard against fraudulent
and self- seeking investments especially by public
official. It will ensure compliance with the local and
international laws and standards. Furthermore, it will
assist in promoting the anti-corruption and anti-money
laundering campaign.It will ensure that foreign
investments in the country contribute positively to growth
and sustainable development which will in turn help the
government deliver on its campaign promises and
ultimately fulfill the aspirations of citizens for effective
national development.

4. Beneficial Ownership

Main Objective

Beneficial Ownership disclosure or Transparency has become a growing interest at global and national levels. This interest not only focuses on corporate beneficial ownership information disclosure but also seeks to expose conflict of interest among public office holders otherwise known as Politically Exposed Person (PEPs). It derives from the need to trace criminals who hide their identities behind corporate structures to defraud countries through corruption, tax evasion, undue favoritism, money laundering and illicit financial flows.

Milestones

• Implement Recommendations 1, 2 and 4 in the Sierra Leone Extractive Industries Transparency Initiative Report on Legal and Institutional Review of Beneficial Ownership Disclosure in Sierra Leone.
• Recommendation 1: Amend the Companies Act (2009) to include beneficial ownership disclosure requirements for all corporate entities, including mining, oil and gas companies
• Recommendation 2: Put the Corporate Affairs Commission (CAC) in charge of administering beneficial ownership disclosure requirements for all corporate entities, including mining, oil and gas companies
• Recommendation 4: Arrange technical assistance and capacity building for the CAC, SLEITI, NMA, and Petroleum Directorate to strengthen beneficial ownership information collection and verification processes
• Compile and make publicly available (including online) a Comprehensive Beneficial Ownership Register

Editorial Note: For the complete text of this commitment, please see Sierra Leone’s action plan at (https://bit.ly/3bPiqwh).

Commitment Analysis

This commitment aims to strengthen beneficial ownership disclosure, and expose conflicts of interests among politically exposed persons. ^[45] Lack of beneficial ownership information can facilitate corruption, tax evasion, money laundering, and illicit financial flows. ^[46] The Panama Papers, for example, recently revealed that the opacity of corporate shareholding in Sierra Leone’s largest diamond mine facilitated the undervaluation of diamonds that cost the country millions in tax revenues. ^[47] Conversely, the availability of beneficial ownership information enables a state and its citizenry to know whether the ultimate controllers and financiers of a project have a track record of project success and social and environmental responsibility, and whether there is a real plurality of actors in a sector, not an oligopoly or monopoly. ^[48]

Commitment 4 focuses on strengthening beneficial ownership in Sierra Leone by amending the Companies Act, 2009; putting the Corporate Affairs Commission in charge of administering beneficial ownership disclosure requirements; establishing a publicly-accessible online Comprehensive Beneficial Ownership Register; and arranging technical assistance and capacity building.

This commitment is relevant to the OGP value of access to information, as it will make previously unavailable government-held information on beneficial ownership accessible in the public domain.

At the time the commitment was designed, Sierra Leone’s Companies Act, 2009 made no reference to beneficial ownership disclosure requirements. The 2018 Corporate Governance Code requires beneficial ownership information disclosure to the CAC, ^[49] but operates on a “comply or explain” model. If a company refuses to comply with the beneficial ownership requirements, the CAC had no ‘teeth’ to enforce compliance. ^[50] As a member of the Extractives Industry Transparency Initiative (EITI), Sierra Leone is bound by the 2016 EITI Standard, which requires member states to disclose beneficial ownership information in their mining, oil, and gas companies by 1 January 2020. In 2017, Sierra Leone EITI (SLEITI) prepared a roadmap detailing the steps to be taken to implement full beneficial ownership disclosure in the mining, oil, and gas sector. ^[51] An independent legal and institutional review of beneficial ownership in Sierra Leone, however, cautioned against a piecemeal approach and recommended amending the Companies Act, 2009 to include beneficial ownership disclosure requirements for all corporate entities. ^[52]

If fully implemented as written, the potential impact of this commitment will be moderate. The commitment is verifiable, with clearly identifiable and measurable milestones and activities. Making beneficial ownership information disclosure mandatory builds on the normative framework already established by the Corporate Governance Code. However, requiring the establishment of a publicly-accessible online Comprehensive Beneficial Ownership Register represents a change from existing practices. However, the commitment remains limited in scope by failing to expressly address public disclosure of information on the shareholding of PEPs.

Commitment 4. Beneficial Ownership

Limited

This commitment aimed to make beneficial ownership disclosure mandatory for all corporate entities and make relevant information publicly available through a Comprehensive Beneficial Ownership Register.

While the IRM initially coded this commitment as “noteworthy,” none of the associated milestones were achieved due to constraints that limited implementation. First, as a result of logistical and financial constraints, the government limited the commitment scope to disclosing beneficial ownership information in the extractives sector. ^[60] Two interviewees ^[61] attributed this narrowing to the fact that regulatory institutions in the extractives and infrastructure sectors were already set up, making beneficial ownership disclosure easier. Mohamed Baimba Koroma explained that the government was still committed to making beneficial ownership disclosure mandatory for companies in all sectors, which would be captured in the ongoing conversation around amending the Companies Act in addition to the Mines and Minerals Development Bill, which was currently under consideration in parliament. ^[62] Notably, the government, as a member of the Extractives Industry Transparency Initiative (EITI), was already bound to disclose beneficial ownership information in their mining, oil, and gas companies by 1 January 2020. As late as 2017, the recommendation that the government amend the Companies Act to include beneficial ownership disclosure requirements for all corporate entities had been raised.

Three interviewees confirmed that plans are in the pipeline to amend the act to include a provision that mandates all companies disclose their beneficial owners. ^[63] Besides the information provided by the interviewees, there was no evidence of government efforts to amend the Companies Act during the action plan cycle. One notable change was the adoption of the National Corporate Governance Code 2018 (launched in January 2019), a year before the commencement of the current cycle of the action plan. ^[64] According to the policy document, all organizations regulated by the Corporate Affairs Commission must disclosure their beneficial owners alongside the submission of their annual return. ^[65] However, the requirements’ inclusion in a policy document renders the legal threshold of enforcement low. Obstacles to completing the first milestone to amend the Companies Act subsequently limited progress for the remaining activities, such as amending regulations and establishing a registry.

While the Companies Act was not reformed, at the moment of writing this report, there was a mining sector bill before parliament that includes a duty to disclose beneficial ownership information for mining companies (article 156). ^[66] This bill was developed not only in line with Sierra Leone’s commitment under the EITI but also as part of their OGP commitment, both of which are in line with the country’s strategic plan (Medium Term National Development Plan 2019-2023). ^[67] Mabinty M. Kamara writes that the long-standing and recurring problems between mining companies, local host communities, and the government, as well as the president's commitment, necessitated the demand for reform in the mines and minerals sector. ^[68] Jariatu S. Bangura was of the view, however, that the Mines and Minerals Development Bill before the Sierra Leonean parliament aims to repeal and replace the Mines and Minerals Act of 2009, which is largely related to the EITI process. ^[69] Notably, there has been public engagement during the bill-drafting process. ^[70] For instance, the Natural Resource Governance and Economic Justice (NaRGEJ) submitted recommendations to the ministry, raising several concerns, including the need for inclusion of the principle of fundamental human rights, governance mechanism, impact assessment, community consent, and community beneficiation. ^[71]