Book Review: An Assessment of Nigeria’s Beneficial Ownership Transparency Legal framework
By Lovelyn Agbor-Gabriel and Abubakar Jimoh
In order to deepen awareness and understanding of state and non-state actors on outstanding shortcomings of Nigerian beneficial ownership transparency laws and practice, the Civil Society Legislative Advocacy Centre (CISLAC), in collaboration with Transparency International, has engaged a critical study into country’s commitment towards beneficial ownership information and regulation.
The 51-page published report titled “Nigeria country Report: An Assessment of Nigeria’s Beneficial Ownership Transparency Legal Framework” provides a detailed account of various limitations in the definition of beneficial ownership attributed to Nigerian anti-money laundering and Company Law that respectively defines beneficial ownership, but not covering control through other means in addition to legal ownership and issues affecting beneficial ownership of private companies.
In page 4, the report reveals country performance as the worst in the area of accessing beneficial ownership information. “There are no legal requirements for Nigerian companies to maintain information on beneficial ownership of their shares within Nigeria. Neither are there legal requirements for beneficial owners / shareholders to inform the company of changes in share ownership. Moreover, public companies may conduct verification of ownership information of shares, but it is not mandatory.”
Accessing the degree of linkage between Nigerian laws and 10 beneficial ownership principles, the study in page 5 scores Beneficial Ownership definition, 75%; Identifying and mitigating risk, 50%; Acquiring accurate beneficial ownership information, 13%; Access to beneficial ownership information, 29%; Beneficial ownership of trusts, 75%; Access to beneficial ownership of trusts, 50%; Duties of businesses and professions, 79%; Domestic and international cooperation, 58%; Beneficial ownership information and tax evasion, 67%; and Bearer shares and nominees, 69%.
The study discloses existing lack of central institution on Beneficial Ownership and decentralised nature of Nigeria’s beneficial ownership information, which to a large extent impedes adequate accessibility to beneficial ownership information. “In Nigeria there is no central beneficial ownership registry and companies are not required to disclose beneficial ownership to the CAC.”
It recommends establishment of a central register of beneficial ownership information to provide access to information for both public and competent authorities; amendment to legislation to explicitly provide access for all law enforcement bodies and tax agencies to beneficial ownership information within a specified timeframe.
While some existing regulations impose reporting obligations on Trust and Company Service Providers (TCSPs) as well as non-profit organizations registered as trustees, the report observes that non-professional trustees such as family members or friends of the settlor are not covered by law. As a result, it proffers introduction of beneficial ownership transparency rules for non-professional trustees such as family members or friends of the settlor.
It observes the efforts of financial institutions which are required by Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Regulations to conduct due diligence and where appropriate, obtain information on the purpose and intended nature of the business relationship of their potential customers.
The report in page 29, acknowledges that Nigerian law does not impose any restriction on information sharing (e.g. confidential information) across in-country authorities; hence, domestic authorities can access beneficial ownership information through written requests or memoranda of understanding. It however, discerns lack of clear procedural requirements defined and published for beneficial ownership information request from foreign jurisdictions. “Foreign authorities have no access to beneficial ownership information maintained by Nigerian authorities.”
In order to bridge the gaps in beneficial ownership definition, the study recommends among other things introduction of definition of beneficial ownership for the purposes of the CAMA, extension of the 10% substantial ownership reporting requirements to all owners and beneficial owners, and application of the same approach to the 5% ownership reporting threshold imposed by the SEC Rules applicable to public companies.
The report recommends online publication of the National Risk Assessment Report, and communication of the results of the risk assessment to financial institutions and relevant DNFBPs in “Identifying and mitigating risk” associating with Beneficial Ownership.
It recommends among other things, amendment to CAMA to require all companies to carry out further enquiries to ascertain the ultimate beneficial owners of the shares held by the natural and legal owners of the company in order to provide adequate information on beneficial owners.
According to the report an adequate definition of beneficial ownership in national legislation should focus on the natural (not legal) persons who actually own and take advantage of the capital or assets of the legal person, rather than just the persons who are legally (on paper) entitled to do so.
“It should also cover those who exercise de facto control, whether or not they occupy formal positions or are listed in the corporate register as holding controlling positions,” it added.
Furthermore, page 37 to 51 of the report covers methodology and practical questions deployed in the process of fact-findings including scoring criteria.