Can Europe Make It?

Ownership and the global coronavirus pandemic

Just as the pandemic has exacerbated pre-existing weaknesses in many countries’ health systems, the toxic impact of pre-existing governance issues has been heightened, too.

Louise Russell-Prywata
24 June 2020
Panama Papers whose 300 reporters collaborate on 6 continents to expose offshore tax havens, win 2017 Pulitzer prize.
Panama Papers whose 300 reporters collaborate on 6 continents to expose offshore tax havens, win 2017 Pulitzer prize.
|
TNS/PA. All rights reserved.

By now we know that the economic, social and political repercussions of the coronavirus pandemic will be with us for years, if not decades. It is already clear to us that the impact on our lives extends well beyond the present public health emergency.

Although it makes fewer headlines than job losses or national lockdown policies, one of the most significant impacts of the crisis worldwide is on global governance, where pre-existing weaknesses and problems have become further exacerbated.

Beneficial ownership opacity – in other words, the inability to find out who owns and controls specific businesses – is an issue around the world as governments focus on the pandemic. Moreover, it is an issue with wide ranging implications.

Fraud and corruption

Why should beneficial ownership, of all the items on the world’s must-do-better list, be such a concern? Simply put, as governments mobilise funds to tackle the public health crisis, the economic resilience and good governance imperatives for publishing details of the owners of companies are becoming stronger and more urgent.

As trillions of dollars are put into COVID-19 efforts, the focus is understandably on enabling the emergency procurement of immediate healthcare supplies and shoring up jobs, livelihoods and key supply chains. However, as governments do so, analysis by the U4 Anti-Corruption Resource Centre shows that key checks and balances on expenditures are being eased or breached. Inevitably, this means a much greater risk of public money being lost to fraud and corruption, or otherwise diverted away from supporting those most in need.

Just as the pandemic has exacerbated pre-existing weaknesses in many countries’ health systems, the toxic impact of pre-existing governance issues has been heightened, too. In late May, an anti-corruption and COVID-19 event held by the Organisation for Economic Co-operation and Development underscored this point. Drago Kos, the chair of the OECD anti-bribery working group, was blunt in his assessment: the current conditions are “a paradise for corruption”. We simply cannot afford to wait until the immediate public health crisis has abated before tackling the corresponding governance crisis.

OpenOwnership

What needs to be done to strengthen transparency? OpenOwnership, a global initiative that works to make it easier to access data about who owns, controls and benefits from companies,

recently held an expert panel with representatives from government, industry, civil society, academia and the media to discuss how beneficial ownership transparency cuts across both short-term emergency response and longer-term economic recovery.

During that session, experts identified five areas where beneficial ownership transparency is of the utmost importance to government, civil society and citizens:

– Procurement: Governments are currently undertaking extensive emergency public procurement to meet COVID-19-related public health needs, and they are facing global shortages of key supplies such as PPE. Without adequate due diligence, governments can fall prey to fraud and counterfeiting schemes, as unscrupulous actors seek to take advantage of the pressing demand.

Ownership transparency allows governments to quickly and effectively perform minimal standards of due diligence on the companies that they are buying goods and services from. As well as reducing immediate risk of corruption, it provides a valuable trail for future auditing.

Tracking financial assistance: Many trillions of dollars are currently being pumped into economies around the world. A significant amount of these funds will go to companies that are receiving financial support as part of economic stimulus and wage protection packages. But without effective tracking, these funds are at risk of diversion through corruption or mismanagement.

Beneficial ownership transparency gives governments valuable information about who is ultimately benefiting from the economic stimulus support provided to companies, allowing states to target support where the need is greatest.

– Supporting domestic economies: In addition to guarding against corruption and mismanagement, governments face the challenge of ensuring that financial support to companies goes toward strengthening the domestic economy – rather than people and firms based elsewhere. Countries including Canada, Denmark and France have refused emergency financial support to companies based in tax havens.

Ownership transparency can provide governments with the information they need in order to understand the ownership structures of companies, and see where different companies in the ownership chain are based.

Countries including Canada, Denmark and France have refused emergency financial support to companies based in tax havens.

– Attracting investment: As attention turns to the post-pandemic economic recovery, governments will seek to attract inward investment to their countries. But investors rightly want reassurances about the governance standards in places they are putting their money. Lack of beneficial ownership transparency is a key risk factor.

Ownership transparency means that everyone in the market can quickly understand who they are really trading with, thereby reducing risk to legitimate businesses and assisting inward investment that can support economic recovery.

– Building trust in a time of crisis: In democracies around the world, governments require citizens to have sufficient trust in their handling of the pandemic to ensure widespread compliance with measures such as lockdowns and social distancing. Lack of ownership transparency means that citizens are less able to know who benefits from government funds, and this has a strongly negative impact on public trust.

Ownership transparency is part of a suite of transparency and accountability measures that are important for restoring and retaining public trust in governments, and that governments can demonstrate that taxpayer funds are being spent efficiently in response to the pandemic.

Ownership transparency is part of a suite of transparency and accountability measures that are important for restoring and retaining public trust in governments.

OO Principles

As the impact of the pandemic continues to unfold, OpenOwnership has been consulting with partners to identify how we can best respond, and testing out new ways of working. Going forward, our approach is two-fold.

Firstly, in response to demand from governments and civil society actors, we will continue to support beneficial ownership reforms where they are already under way. In addition, we will support countries that are making commitments to beneficial ownership transparency as part of their COVID-19 response.

Secondly, we are responding to the heightened risks of beneficial ownership opacity in public procurement and delivery of economic stimulus packages, by providing guidance and easy to deploy tools to increase the availability and use of beneficial ownership data in these contexts.

To help us meet these delivery needs, we have started to simplify our guidance and tools. These are framed around the recently launched OpenOwnership Principles. The OO Principles define what good beneficial ownership transparency looks like in practice, distilling down the research and analysis we have conducted over the last three years.

The OpenOwnership Principles will guide our support to governments and civil society to generate and use beneficial ownership data to address the wide range of integrity and governance challenges we face in both the short and long term as the world navigates the COVID-19 pandemic.

In the language of the International Monetary Fund’s latest Fiscal Monitor, governments should “do what it takes” to deliver economic support, “but keep the receipts”. This means disclosing who benefits from contracts and financial support to companies, and it is critical to ensuring accountability in countries’ responses to the pandemic.

Get weekly updates on Europe A thoughtful weekly email of economic, political, social and cultural developments from the storm-tossed continent. Join the conversation: get our weekly email

Comments

We encourage anyone to comment, please consult the oD commenting guidelines if you have any questions.
Audio available Bookmark Check Language Close Comments Download Facebook Link Email Newsletter Newsletter Play Print Share Twitter Youtube Search Instagram WhatsApp yourData