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UK announces transparency measure around beneficial ownership

Speaking at the Open Government Partnership Summit in London last week, Prime Minister David Cameron announced the creation of a public registry that would show who really owns, and controls, companies.

The announcement comes on the back of Cameron’s pledge to introduce more transparency around beneficial ownership of companies, a pledge that was part of his effort to put ‘tax, trade and transparency’ at the heart of the UK’s presidency of the G8.

Advocacy efforts from civil society organisations such as Global Witness, ONE, Christian Aid and others have been instrumental in achieving this new commitment from the Prime Minister. The challenge now will be to translate this commitment into strong rules in the UK and ensure that the UK takes this issue to the EU level (in the context of the Anti-Money Laundering Directive) and to other international fora such as the G20. While welcoming the Prime Minister’s commitment, beady eyed campaigners were quick to point out that there was no commitment made to revealing the beneficial owners of trusts…

At the moment it’s very simple for someone to hide the identity of who really owns a company. Throw together various subsidiaries, secrecy jurisdictions and nominees and the result is an impenetrable maze no-one can navigate.

So why is this issue so important for the extractive sector?

• Because when a gold company turns out to belong to the daughters of the Azeri President, you can be sure that the company wasn’t awarded the lucrative contract because it offered the most technologically advanced method of mining.* 

• Because when thousands of Equatorial Guinea’s citizens live in poverty, the President’s son shouldn’t be spending $2.7 million of oil money on Michael Jackson Paraphernalia. Nor should he be planning to spend three times the country’s health and education budget on a yacht. Or, really, spending any of the money that rightfully belongs to all EquatoGuinean citizens.

• Because citizens from the DRC really can’t afford to lose out on potential revenue. Not when their country languishes at the bottom of the human development index and their underground riches could lift millions out of poverty. Yet that’s what happened when, according to Global Witness, ‘ENRC made large payments to offshore companies to purchase prize mining assets in Congo, which were acquired at significantly undervalued prices.’

These are just a few examples which all relate to corruption in the extractive industry. We haven’t even touched on how secrecy around beneficial ownership enables drug lords and arm dealers to launder money, or supports the work of terrorists and  other criminals.

This public register will make it harder for people to hide their identities and true intent. It will be harder for people to create a company destined only as a shell through which to launder money. Transparency will shed a light on a swathe of corrupt practices and is a step in the right direction to change a system currently rigged to favour those who want secrecy.

Some might say there will always be crime and corruption, but surely we shouldn’t be making it quite so easy?

*In 2007 the newly formed consortium AIMROC was awarded a contract for six gold fields in Azerbaijan, despite having no previous experience in gold mining. In 2012, journalists revealed that President Aliyev’s two daughters held important financial stakes in the consortium.


Want to find out more?

Open Society Foundation have a briefing paper - How Shell Companies Aid Terrorism, Crime, and Corruption

Read Global Witness’ press release.


US to follow suit?

Civil society activists in the US have called on their government to follow in the footsteps of the UK and make public information concerning the beneficial ownership of companies.

Creating more transparency around who really owns, and controls, companies was part of the US’ recent commitment at the G8 and the FACT (Financial Accountability and Corporate Transparency) coalition are urging the US government to change that pledge into a reality.

This is all the more vital as more companies are created in the US ‘each year than in the rest of the world combined, and many states allow the creation of anonymous companies or “phantom firms.”’

In Brief

• Check out the winners of the EITI info-graphic competition

• The EU Transparency and Accounting directives promise ground-breaking transparency in the extractive sector. Now that they’ve been signed into EU law, it’s time for countries to transpose the legislation at the national level. Last week the UK pledged to complete transposition of the EU rules into national law in 2014

Niger – contract transparency is key for a brighter future

For the first time in its history, Niger has the chance to get a fair deal for its resources.

Niger has long sold its uranium to AREVA, the French nuclear company, for less than it was worth at market value. France wrangled the lucrative deal days before the end of its empire, ensuring itself a very cheap supply of the mineral. Over half a century, this unfair deal is thought to have cost Niger – which lies at the bottom of the human development index - $20 billion in potential revenue.  This has meant that despite their mineral wealth, Niger’s citizens live in poverty and benefit little from their uranium. Meanwhile, that same uranium lights up millions of homes across France.

The secrecy which has historically surrounded Niger’s contracts with AREVA has enabled the perpetuation of this unbalanced deal. Classified as defence agreements rather than economic ones, the deals were made between states and behind doors. Citizens who dared ask what Niger was getting for its uranium, and what the government was spending the revenues on, were threatened and imprisoned.

In order for a deal to truly benefit all citizens rather than the few in power, the terms must be public. Moreover the bidding process must be open, so that civil society can ensure the best company was chosen for the right reasons.

The time for change is now – the Nigerien government has long stated that it wants to rebalance its relationship with AREVA and get more for its resources. AREVA’s contract is up for renegotiation by the end of the year and the Nigerien government has conducted an audit of AREVA operated mines to serve as the basis for that negotiation.

However, it would seem that AREVA are pushing back. The company has threatened to shut down production in one of Niger's largest uranium mines, Somair, if the government continues to seek change to the partnership.

Niger is on the cusp of finally being able to profit from its natural resources, but in order to do so the renegotiation of contracts with AREVA must be done in a transparent manner. In 2010, Article 150 of the new Nigerien constitution stated that all extractive contracts would be public. It is time for Niger’s government to make good on that statement and transform it from a principle into a reality.

France and AREVA need to play their part too and they need to play fair. Oxfam France has called on the French government not to apply pressure on Niger to accept a poor deal for its uranium.

Civil society is currently locked out of the negotiations which started last month. If the Nigerien government truly wants its citizens to benefit from its natural resources, those negotiations and contracts must be brought out into the light.

To find out more about PWYP’s work in Niger, visit our country page or watch these videos.

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