Oct 17, 2020 News
Kaieteur News – Before the end of 2020, the Extractive Industries Transparency Initiative (EITI) has categorically stated that Guyana and other nations which subscribe to its standards, must disclose the identities of the real owners—also known as beneficial owners—of the companies which have obtained rights to extract oil, gas and minerals.
Once the People’s Progressive Party/ Civic (PPP/C) Government honours this requirement, the nation would no longer be in the dark about all the individuals who were able to pocket millions of dollars in profits following the suspicious award of the Canje Block to industry unknowns.
The international body said it has decided to crack down on this global problem since hidden identities in the extractive sectors only help to feed corruption and tax evasion. It also added that people who live in resource-rich countries are at particular risk of losing out when facing this problem as extractive assets are too often misallocated for corrupt reasons.
The EITI further noted that its Standard requires public officials, also known as Politically Exposed Persons (PEPs), to be transparent about their ownership in oil, gas and mining companies. The international watchdog said that this information, once provided by its members, will be publicly available and will be published in EITI Reports and/or public registries.
Once published, EITI said law enforcers, civil society and others have a responsibility to scrutinize the information, and take action to hold to account those who misuse anonymous companies. It should be noted that countries which fail to honour the requirements of the international body could face expulsion.
Cost of hidden ownership
While it is acknowledged that oil, gas and mining projects can yield great profits both to extractive companies and governments, the EITI was keen to point out that experience has unfortunately also shown that in many cases, in particular where governance is weak, rights to extract oil and minerals may be given to companies that do not have any competence.
The international body said it has found that such companies may be given access to lucrative extractive projects because their owners are politically connected, or because their owners are willing to engage in questionable deals aimed at generating quick profits for a few rather than benefits for wider society. The international body said that suspicion or confirmed wrongdoing can lead to devaluation of other extractive assets, and deter overall investment in countries rich in natural resources. EITI said, too, that anonymous companies make it harder to curb money laundering and corruption as it enables wrongdoers to hide behind a chain of companies often registered in multiple jurisdictions.
Further to this, EITI stated that developing countries lose US$1 trillion each year as a result of corrupt or illegal deals, many of which involve anonymous companies. In 2013 for example, the Africa Progress Panel found that the Democratic Republic of the Congo (DRC) in the period 2010-2012 lost at least US$ 1.36 billion from five mining deals hidden behind a structure of complex and secret company ownership. According to DRC’s EITI Reports, this is about the same as the country’s average annual revenue from oil, gas and mining in the same time period. EITI is of the belief that the disclosure of beneficial ownership will help lower the risk of such financial misconduct happening in other territories.
It also posited that beneficial ownership transparency can help countries improve the investment climate, reduce reputational and financial risks, prevent corruption and illicit financial flows, improve the rule of law, increase trust and accountability, and enhance revenue collection.
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