Beneficial Ownership Disclosure by Multilateral Development Banks

Joseph Kraus at The ONE Campaign recently summarized for GAB readers  measures governments are taking to require companies registered in their territory to reveal the natural person or persons who own and control them, their beneficial owners.  A parallel effort has begun to persuade the international development banks – the World Bank, the African Development Bank, the Asian Development Bank, the Inter-American Development Bank, and the European Bank for Reconstruction and Development – to reveal the beneficial owners of the companies “their monies” (read taxpayer monies) fund.  In May 2017, the U.S. Congress ordered the Secretary of the U.S. Treasury to see that each bank: –

“collects, verifies, and publishes, to the maximum extent practicable, beneficial ownership information … for any corporation or limited liability company, other than a publicly listed company, that receives funds from [it].”  Division J, section 2079(f) of the  Consolidated Appropriations Act, 2017.

As the U.S. is a significant funder of each bank, an American serves on the board of each.  In the 2017 law, Congress directed the Treasury Secretary, to whom the American board members answer, “to instruct” each to urge its bank to comply with Congress’ wish on beneficial ownership.  It also required the Secretary to report on how the successful the American board member had been in persuading the other board members and the management of their bank to gather and reveal beneficial ownership information.

The Secretary’s report contains several surprises on which banks took the U.S. effort on beneficial ownership seriously and which ones blew it off.  With the banks that ignored the U.S. effort, it leaves unanswered an interesting question: What if anything did board members representing other countries committed to the disclosure of beneficial ownership do to push the issue?

This IFI table, compiled from the Treasury Secretary’s report, ranks how well each bank responded to the urgings of the U.S. board member.  The World Bank and the Asian and Inter-American Development Banks lend money to both governments and to private firms; the EBRD lends only to the private sector and the African Development Bank almost entirely to governments.  As the report does, the table distinguishes between the two types of lending.

Of the four banks that lend to governments, the World Bank has far and away been the most responsive to the U.S. effort.  As the table shows, and the report explains in detail, it has initiated a pilot program for the years 2018 – 2020 requiring the firm winning a contract on any large Bank-funded project to disclose the identity of any person owning 25 percent or more of its shares or controlling 25 percent or more of its voting rights or having the right to appoint a majority of its board.  The Bank has pledged to publish the identities of these beneficial owners.

The African Development Bank is the second most responsive.  According to the Treasury report, it has agreed to follow the World Bank’s lead in collecting and publishing beneficial ownership data on the winning bidder and will even go the Bank one better by setting the threshold for disclosure at 10 percent.  (As of this writing no information on when it will implement the procedures was available.) As the table indicates, the Inter-American Development Bank and the Asian Development Bank appear to be deaf to U.S. pleas on beneficial ownership.

For private sector loans, the World Bank’s International Finance Corporation (its private sector lending arm), scores slightly better than the other banks private sector lending operations.  According to the Treasury report, it “occasionally” discloses the beneficial owners of the companies to which it lends.  The other three never disclose beneficial ownership data.  All do say, however, that they take steps to determine the beneficial ownership of private sector borrowers and apparently will in some cases not lend if they cannot determine who in fact owns the borrowing entity.

The law requiring the U.S. Treasury Secretary to press the multilateral development banks on beneficial ownership disclosure must be renewed each year.  It will be interesting to see if the current Congress feels as strongly on the issue as the last one, and if it does renew the law, whether the current administration will as vigorously advocate for more disclosure as it did last year.  Even if it does not, nothing would stop board members from other countries from picking up the baton.  And perhaps an NGO lobbying for more beneficial ownership disclosure could produce a report along the lines of the U.S. Treasury’s?  Perhaps going a step further and including details about which board members of what bank supported beneficial ownership disclosure?




1 thought on “Beneficial Ownership Disclosure by Multilateral Development Banks

  1. Pingback: Beneficial Ownership Disclosure by Multilateral Development Banks | Matthews' Blog

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