Today the Malawi Extractive Industries Transparency Initiative (EITI) Multi-Stakeholder Group started work on a road map for beneficial ownership disclosure in Malawi’s extractive sector (mineral, oil and gas and forestry).

Malawi joined EITI as a candidate country on 22 October 2015 and is required to submit the first EITI report in April 2017. This will include company disclosure of payments made to government and government disclosure of receipts of revenue from mining, oil and gas companies. Companies will also be requested to declare beneficial owners, the natural person(s) who directly or indirectly own or control a corporate entity, as part of the new EITI 2016 Standard. According to the EITI Beneficial Ownership Road Map presentation,

A beneficial owner is always the living, breathing human being who ultimately profits from the company’s activities, or controls the company’s activities. It is never a company, other legal entity, or a nominee/proxy.

The Multi-Stakeholder Group, made up of civil society, private sector and government representatives, gathered at Riverside Hotel, Lilongwe, for an orientation on beneficial ownership and to agree on the necessary steps to introduce beneficial ownership disclosure. This was also the first meeting with newly recruited MWEITI Secretariat Staff, based in the Revenue Policy Division of the Ministry of Finance, Economic Planning and Development. David Nungu, Keith Matanda and Abdul Chiwalo have joined the Secretariat as Technical Expert and Management, Communications Expert and Accountant, respectively.

Malawi Extractive Industries Transparency Initiative Multi-Stakeholder Group meets to plan road map for beneficial ownership disclosure (2 September 2016)

Leonard Mushani, Economist in the MWEITI Secretariat, expounded the benefits of beneficial ownership to improve the investment climate, reduce reputational and other risks, prevent corruption and illicit financial flows, improve the rule of law, increase trust and accountability and enhance revenue collection.

Disclosing beneficial ownership is not necessarily about disclosing wrong doing. There are many legitimate reasons for setting up off shore companies and having complex company structures, such as to insulate savings from economic instability, to protect identities of personnel in insecure places and trade secrets and to pool resources from various jurisdictions. However, secret ownership is also used to hide corruption and the influence of politically exposed persons and evade taxes. The purpose of beneficial ownership disclosure under EITI is to shed light on and stop such practices.

National Coordinator of the EITI, George Harawa, explained the EITI requirements – Malawi must produce a roadmap by 1 January 2017 for beneficial ownership disclosure, and by 1 January 2020 beneficial ownership disclosure must be implemented. A subcommittee of the Multi-Stakeholder Group was set up to develop and implement the beneficial ownership disclosure road map. The subcommittee includes representatives from Bwanje Cement, Mkango Resources, Malawi Revenue Authority, Department of Mines, Citizens for Justice and Catholic Commission for Justice and Peace.

In Malawi, there are 12 recommended aspects of the road map (based on EITI Beneficial Ownership Road Map Presentation)

• How does beneficial ownership link to national priorities? It is not just a critical issue for extractive industries but other sectors too. The Office of the Director of Public Officers’ Declarations is an example of steps Malawi is already taken to address corruption related to ownership of businesses and assets.
• How does disclosure of beneficial ownership fit within the current institutional framework? It is vital to map stakeholders and review laws and policies that already support disclosure of beneficial ownership and to identify how disclosure can be implemented (legally and institutionally).
• How should beneficial ownership be defined in Malawi? The most important aspect of this definition is around ownership and control of a company – should a threshold be set for % shares or voting rights, or does it relate to the ability to exert significant influence on a company’s activities. The definition in the 4th EU Anti-Money Laundering Directive has been used by some Multi-Stakeholder Groups.
• How should Politically Exposed Persons (PEPs) report? The EITI Standard requires that MWEITI  “should specify reporting obligations for politically exposed persons” but it does not define who PEPs are but these are typically considered as people who hold positions of influence including family members and close associates. It may be an option for Malawi to start with the list of Public Officers that are required to declare assets to Office of the Director of Public Officers’ Declarations.
• What is the necessary level of detail for disclosure? The disclosure must include the name, nationality and country of residence of the beneficial owner, according to the EITI Standard. It may also be useful to include, depending on privacy considerations and appropriateness, national identity number, date of birth, residential or service address and means of contact. For example, see the image below of data disclosed in the 2013 EITI Report for the Democratic Republic of Congo

Image courtesy of EITI (2016)

• How should data be collected? Various institutions will be involved in data collection and it is important to consider if this exercise should be extended beyond the extractive industries to other sectors through the Registrar for Companies, for example.
• How should data be assured? How do we know if the declared beneficial owner is the real beneficial owner? An assurance process is vital for verifying beneficial ownership data including requiring companies to certify declarations (attestations), provide supporting documentation, and provide written confirmation from a beneficial owner. The EITI process can also include spot check audits and cross-check information with corporate registers which may require cooperation for registers in other jurisdictions.
• How frequently should data be updated? The most appropriate time and frequency of data collection is important especially where ownership changes often.
• How should data be made accessible? EITI recommends that a public register is established and maintained and the annual EITI report should be in an open data format. In Malawi, this could be incorporated into the cadastre and online portal.
• What sort of capacity building needs are there? 
• What are the technical and financial needs?
• Who is responsible for implementing the road map and when?

See an earlier piece I wrote about beneficial ownership disclosure and its importance for Malawi and the EITI process.

Learn more about the importance of the disclosure of beneficial ownership with Charmian Gooch (co-founder of Global Witness)