Home' Trinidad and Tobago Guardian : April 20th 2017 Contents BG18 | COMMENTARY
BUSINESS GUARDIAN guardian.co.tt APRIL 20 • 2017
Secret company ownership disclosure
Imagine your reaction if you heard
that a person holding public office
was found to have fraudulently ac-
quired oil, gas or mining contracts by
using the name of a company that he
or she secretly owns?
Or, what if tomorrow's newspaper headlines
read: "Businessman found financing $6 billion
in crime through a company set up in wife's
name." It is likely that you would be outraged
at the mere thought that someone was able to
use their knowledge of company and banking
laws to illegally amass wealth. This pill may
be harder to swallow considering how hard
you may have worked to earn an honest dollar.
The truth is our local laws do not obligate
companies to identify, publicly, the real indi-
viduals who benefit from the ownership of the
company (ie the beneficial owner).
As a result, an errant owner determined
to conceal his identity can register the legal
ownership of the company in someone else's
name while using a set of legitimate options (eg
omnibus accounts, chains of corporate vehi-
cles and pyramid structures) to create opaque
Given the difficulty of identifying the real
owners of companies, billions of dollars can
be illegally earned through tax evasion, money
laundering and Ponzi schemes, just to name a
few. This translates into wanton corruption and
mistrust, lower levels of government tax reve-
nue and the creation of company risks (criminal
and reputational) within related sectors.
While T&T is yet to implement a beneficial
ownership law, the rest of the world appears
to have learned a lesson in the aftermath of
egregious corporate scandals including the fall
of Enron in 2001 and, most recently, the 2016
Panama Papers disclosures. The proliferation
of disclosure laws and regulations---includ-
ing the Sarbanes---Oxley Act of 2002 and EU
Directives of 2004 signals a shift in attitudes
whereby non-disclosure of clandestine com-
pany information is no longer tolerated.
But how effective are these legislative re-
Is adding more layers of rules and regulations
the right lesson?
Would such an approach work in T&T?
A World Bank 2016 study shows that the
move towards stricter reporting rules alone
has not, and will not, yield the intended results.
As explained by the bank, "Even with a sys-
tem of disclosure rules and regulations, the true
ownership of a company can remain opaque
or, in many cases, impossible to establish."
Having done an empirical review of the
annual reports of 280 listed firms from 14
jurisdictions, the bank found the majority of
firms report the bare-bones of their benefi-
cial ownership structure in a dry, literal and
legalistic manner without indicating how the
control structure affects how it is governed.
Therefore, only individuals with a certain level
of expertise or local knowledge can decipher
Regardless of the reason for insufficient
disclosure, a more transparent approach is
necessary in the self-interest of companies
and for countries to attract investors.
"Open communication is increasingly vi-
tal to commercial success. It builds trust and
facilitates the type of inclusive relationships
that provide firms with the best opportunity to
succeed in hypercompetitive global markets,"
the report stated. This has significant relevance
especially for companies operating in the oil
and gas sector in T&T.
It is bad-for-business if an oil and gas com-
pany---seeking to invest funds through a joint
venture with another operator---conceals the
identity of its real owner and has a muddy com-
More local companies are seeking these part-
nerships given the twin evils of declining re-
serves and depressed commodity prices, which
already make attracting investment difficult.
An alternative approach outlined in the
World Bank study is an open communication
approach that involves "nudging" companies
to embrace the commercial and strategic ben-
efits of being more open with stakeholders. To
do this, disclosure should be seen and framed
as an opportunity to add value to a company
as opposed to being a burden or an obligation
to be fulfilled.
The Extractive Industries Transparency Ini-
tiative (EITI) in T&T works with companies to
ensure individuals holding ownership rights in
oil, gas and mining projects---including those
that are politically affiliated---are revealed.
Fifty-one companies submitted information
on their beneficial owners, which was included
in the last 2014-2015 TTEITI report.
In addition to the task of reconciling the
accounts of the extractive sector, we plan to
have the independent administrator ascertain
the veracity of the beneficial ownership infor-
mation submitted by these companies in our
upcoming 2016 report.
Our policy is to always be flexible and adapt
our approach to incorporate new research and
to adjust to changes in the environment. In
pursuit of this, the TTEITI secretariat is en-
gaging a legal consultant to conduct a study
that will help tailor our approach to meet the
specific needs of T&T. This dovetails well
with the Government's plans to make ben-
eficial ownership disclosure a national legal
requirement, as revealed by Prime Minister
Rowley at the 2016 Anti-Corruption Summit
The TTEITI welcomes this opportunity to
work with the Government to ensure compa-
nies adhere not only to the letter of the law but
also embrace the spirit of disclosure. This is
part and parcel of helping a company fulfil its
own commercial objectives.
Successfully clamping down on secret own-
ership will require the happy marriage between
simple laws, company collaboration and civil
society oversight to monitor compliance. The
extent to which nudging will encourage com-
panies to be open about their beneficial owners,
especially in an environment that facilitates
an "eat-ah-food" mentality, will be revealed
Until then, the TTEITI continues to work
with the Government, companies and civil
society organisations to find the best ways to
improve transparency around company owner-
ship in both the energy and non-energy sectors.
Visit our official website at www.tteiti.com
or email Nazera Abdul-Haqq at nabdul-haqq@
energy.gov.tt, to have your say in the TTEITI
implementation or for more information on our
TTEITI tackles the 'eat ah food' mentality
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