Beneficial ownership disclosure
Definition: beneficial owner is the natural person who ultimately owns, controls, benefits from a legal entity or legal arrangement.
The history of beneficial ownership transparency
A lack of information about who ultimately owns and control companies and other legal entities, creates an environment conductive to tax evasion and money laundering and enabling illicit flows from developing countries, including countries rich in natural resources.
Taking this into consideration, during the G8 summit in May 2013, all G8 countries agreed to take steps to tackle the problem of hidden ownership and made appropriate decisions. There has since been an increased global momentum to make information on who owns, and profits from, companies and trusts available to tax collection and law enforcement agencies, for example through central registries of company beneficial ownership.
In October 2014, the Financial Action Task Force (FATF) has issued guidance on Transparency and Beneficial Ownership. At the Brisbane Summit in November 2014, the G20 agreed the High-Level Principles on Beneficial Ownership. In June 2015, the European Union enacted the Forth Anti-Money Laundering Directive (AMLD). With the adoption of the 2016 Extractive Industries Transparency Initiative (EITI) Standard, EITI has toughened the requirements for the beneficial ownership disclosure.
Azerbaijan and EITI
According to the EITI Standard, by 1 January 2017 implementing countries were required to agree and publish a roadmap, which should contain actions and framework for beneficial ownership disclosure. By 1 January 2020, implementing countries were also required to request, and companies disclose beneficial ownership information for inclusion in the EITI report.
Until March 9, 2017 Azerbaijan was one of the implementing countries of EITI and met its requirements fully. The overseeing body of the EITI implementation in Azerbaijan – the multi-stakeholder group (MSG) involved an international law firm to prepare the roadmap for beneficial ownership disclosure. The law firm has developed a Roadmap for beneficial ownership disclosure (Road-map) in the extractive industries in Azerbaijan, which contains actions and timeline, also meeting international best practices and the recommendations of the EITI Standard. On December 20, 2016 the MSG agreed and published the Roadmap.
On March 9, 2017 the EITI Board decided to suspend Azerbaijan from EITI. Concluding that this decision is an unfair one and believing that the EITI agenda has been significantly transformed from its initial mandate, the government of Azerbaijan announced its withdrawal from EITI.
New Era in the field of the Transparency in the Extractive Industries of Azerbaijan
Immediately after the withdrawal, on April 5, 2017 the President of the Republic of Azerbaijan signed a Decree “On additional measures to increase accountability and transparency in the extractive industries” (hereinafter referred to as “the Decree”). The Decree provides that information on all revenues of government generated from or in connection with the extraction of natural resources as well as other relevant information on extractive industries of the country should be disclosed in line with international standards. According to the Decree in order to ensure transparency and accountability in extractive industries “the Extractive Industries Transparency Commission” (hereinafter referred to as “Commission”) was established. Furthermore, the Executive director of the State Oil Fund of the Republic of Azerbaijan was appointed as the Chairman of the Commission, as well as the State Oil Fund of the Republic of Azerbaijan was assigned to carry out Secretariat function pursuant to the Decree.
The Commission refers to the international transparency principles on its activity.
The cooperation with the Asian Development Bank on Beneficial Ownership Disclosure
Immediately after Azerbaijan’s withdrawal from EITI, the new established Commission started to negotiations with the Asian Development Bank to support Roadmap implementation and appropriate agreement was reached. As a result of negotiations, on September 14, 2017 “The terms of reference for supporting the implementation of the roadmap for beneficial ownership disclosure for extractive industries in Azerbaijan” was agreed and signed by the chairman of the Commission and the mission leader of Asian Development Bank.
The Inception Report on Supporting the implementation of the Road-map for beneficial ownership disclosure for the extractive industries in Azerbaijan was prepared on August 18, 2018 by the BDO Azerbaijan and Michael Barron Consulting.
“The second report on International Good Practice for Beneficial Ownership Disclosure Systems” was prepared on October 2, 2018 by the BDO Azerbaijan and Michael Barron Consulting.
On November 28, 2018 the Consultants submitted the third report on “Draft Beneficial Owner Definition”.
The consultants prepared the;“Consultation document” on beneficial ownership definition. The consultation document is accompanied by the Extractive Industries Transparency Commission’s Chairman’s letter.
As instructed in the letter the “fillable Survey on draft beneficial owner definition” is requested to be completed and submitted by January 25, 2019 to firstname.lastname@example.org (copy to email@example.com ). It is recommended to open and complete the survey using Adobe Acrobat.
Q&A Matrix for Supporting the implementation of the Beneficial Ownership disclosure Roadmap for Extractive Industries in Azerbaijan dated 28 June