Beneficial-owner database lauded despite some weaknesses

Owners of major businesses or their close relatives who hold prominent public positions have so far not declared themselves as such, according to a Myanmar Times review of a new government database on beneficial ownership.

The Directorate of Investment and Company Administration (DICA) recently published on its website the beneficial-ownership database for the Extractive Industries Transparency Initiative (EITI), an international effort to fight corruption in managing revenues from oil, gas and mineral extraction. The database covers the five state firms and 158 companies in the extractives sectors.

All EITI member countries, including Myanmar, must ensure companies that apply for or hold a participating interest in an oil, gas or mining licence or contract in their country disclose their beneficial owners by January this year.

A company’s legal owners are those listed as holding shares or voting rights on its company registration. In Myanmar, like many countries, some legal owners are not the same individuals who ultimately own and/or substantially benefit from a company. These ultimate controllers or beneficiaries, termed “beneficial owners,” often remain secret.

The EITI Standard also requires so-called politically exposed persons (PEP) to be transparent about their ownership in oil, gas and mining companies. A PEP is defined by EITI as someone who is or who has been entrusted with prominent public functions.

The database is one of the multiple initiatives recently undertaken by the Myanmar government to improve the transparency of information on beneficial owners and PEPs. EITI has for years required countries to develop a beneficial ownership regime for extractive industries that conforms to its standards.

Governance experts have welcomed the new database and say that despite the flaws, it represents a significant step forward in enhancing disclosure and transparency.

But the process will take time. As reviewed by The Myanmar Times, only five out of the 163 companies declared that they have PEPs so far. They are Myanmar Thura Gems, Ruby Dragon Jade and Gems, Lyan Shan Jewellery, Eternal Mining and Myanmar Golden Point Family Co. Some companies that involve PEPs appear to have not declared such information.

Kyaing International Gems Co, for instance, appears not to have declared that its registered beneficial owner is connected to or is a close relative or associate of a PEP.

Similarly, conglomerate Myanma Economic Holdings has declared that it does not have any PEPs in the database, even though it is believed to be run by senior Tatmadaw (military) officials. According to a August 2019 report by a UN fact-finding mission, Lt General Hsan Oo, an adjutant-general, is the firm’s chair while Major General Khin Maung Than is its managing director.

UNODC Myanmar Manager Troels Vester said that transparency mechanisms which ensure that outside private interests do not influence the decisions of the public official are an important and powerful corruption prevention tool.

“Such mechanisms not only inform the public of the potential linkages and dependencies of the public officials but also facilitate the detection of corruption and further investigation,” he told this newspaper.

The Myanmar Times has contacted the National Coordination Secretariat of EITI in Myanmar for comments

Governance experts question whether it is feasible to ask owners to declare themselves a PEP, rather than requiring them to provide information about themselves and family members who are or were senior government or military officials. The information would then enable these individuals to be identified by regulators or others as PEP.

In a letter addressed to DICA, Yangon-based Myanmar Centre for Responsible Business (MCRB) argues that the latter approach would be more consistent with Section 22 of the Central Bank of Myanmar’s Directive 18/2019 on “Measures for determining who is a PEP, whether a customer or a beneficial owner.”

The central bank directive requires local banks to seek relevant information from the customer, refer to commercial electronic databases of PEPs and determine whether the beneficiaries of a life insurance policy and/or the beneficial owner of the beneficiaries are PEPs.

More broadly, shareholding information will not always reveal companies in which another individual “exercises significant influence”, as defined by EITI.

MCRB says its study of MyCo, the official company registry, shows that some family businesses have divided shareholdings between individual children and that these will fall below a 25 percent beneficial ownership threshold.

In some cases either a small minority or no shares are held by the founder or father of the family business, even though it is clear that this individual “exercises significant influence” over his children.

“It will be challenging for DICA to verify information, including where there are gaps in filed information about those who ‘exercise significant influence’,” said the letter.

“We recommend that DICA considers establishing a confidential channel of information whereby a member of the public who believes the information on the register to be inaccurate can provide information,” it added.

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Source : Myanmar Times

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