REPORT TO CONGRESS ON

BENEFICIAL OWNERSHIP PRACTICES AT THE 

MULTILATERAL DEVELOPMENT BANKS

A Report to Congress 

in response to

SEC. 7029(f) of the Consolidated Appropriations Act, 2017

United States Department of the Treasury

August 2017
Report on Beneficial Ownership Practices at the Multilateral Development Banks

August 2017

Around the globe, money gained through illegitimate means is all too often funneled through 

seemingly legitimate entities. Such practices can fuel corruption, undermine democratic norms, 

and distort economic growth. The United States recognizes the vulnerabilities posed by such 

shell companies, and has led the global community to address these vulnerabilities through its 

involvement at the Financial Action Task Force (FATF), G7, G20, and other bodies. The 

collection of beneficial ownership information—that is, information on the ultimate person(s) 

who owns or control the legal entity—is essential to combatting criminal activity and promoting 

transparency. 

As major drivers of economic development, multilateral development banks (MDBs) play an 

important role in modeling good practices on the collection of beneficial ownership information. 

MDBs can do this through encouraging borrowing countries to institute open government and 

open contracting policies, as well as requiring the collection of beneficial ownership information 

as a condition of MDB financing. In addition, by reforming and strengthening their own 

beneficial ownership practices, such as by requiring the collection of more information or by 

ensuring third-party verification of such information, MDBs may help establish new best 

practices with regard to beneficial ownership. 

This report summarizes current MDB policies and practices concerning beneficial ownership in 

the banks’ own operations, as required in the Consolidated Appropriations Act, 2017. 

SEC. 7029(f) BENEFICIAL OWNERSHIP INFORMATION.—The Secretary of the 

Treasury shall instruct the United States executive director of each international 

financial institution to seek to require that such institution collects, verifies, and 

publishes, to the maximum extent practicable, beneficial ownership information 

(excluding proprietary information) for any corporation or limited liability company, 

other than a publicly listed company, that receives funds from any such financial 

institution: Provided, That not later than 45 days after enactment of this Act, the 

Secretary shall submit a report to the Committees on Appropriations on steps taken by 

the United States executive directors and the international financial institutions 

consistent with this subsection.

Section I of this report outlines processes that the MDBs use to safeguard their funds and 

minimize the potential that these funds are diverted from their intended purpose. Section II of 

the report details the specific beneficial ownership information practices of the World Bank, 

International Finance Corporation (IFC), European Bank for Reconstruction and Development 

(EBRD), Asian Development Bank (AsDB), African Development Bank (AfDB), and InterAmerican Development Bank (IDB), and describes recent reforms undertaken by the World 

Bank and AfDB in response, in part, to requests from the U.S. government, civil society 

organizations, and other shareholders.

 
I. Safeguarding Public Funds

The MDBs have long used a variety of tools to minimize the risks that their money will be 

diverted to fund illicit or corrupt activities. Strong procurement standards that prioritize 

transparent, competitive bidding procedures are a key tool. These procurement standards have 

been supplemented by dedicated anti-fraud units who investigate allegations of corruption in 

MDB projects, internal procedures to debar companies found to have engaged in fraud or 

corruption, and cross-debarment agreements that prevent companies that engage in fraud at one 

MDB from accessing funding at other MDBs. The MDBs have also increased their cooperation 

with client governments on tackling corruption by referring fraud and corruption cases 

uncovered by their anti-fraud units to client governments and by providing anti-corruption and 

anti-money laundering capacity building to these governments (either through MDB-funded 

projects or partnerships such as the Stolen Asset Recovery Initiative).

The MDBs are also increasingly focused on identifying the beneficial owners of firms that 

receive MDB money, as an additional means for minimizing the risk that MDB funds will 

be diverted to illicit activities. To do this, the MDBs have established processes to determine 

the ultimate beneficial owners of companies that receive MDB financing. These processes are 

most detailed in the cases where an MDB provides financing directly to a private company, such 

as through the International Finance Corporation (IFC), the World Bank Group’s private sector 

lending arm.1 

Each of the major MDBs has developed due diligence policies and procedures to better 

understand the ownership structure of the entities to which they are directly providing financing. 

These policies, which are described in greater detail in the following section, are similar to those 

of a traditional commercial bank and focus on collecting and vetting beneficial ownership 

information of clients. 

Historically, when MDBs lent money to a sovereign government (which, in turn, would procure 

services from private companies to provide goods or services needed to carry out a project), the 

MDBs did not have policies to systematically collect, verify, and publish beneficial ownership 

information on the private companies from which the goods and services were procured.

2

 

However, notable progress is being made to address this, as described below and in the following 

sections of the report. 

For the past several years, as part of our overall objective of making the MDBs as transparent 

and accountable as possible, we have advocated for increased collection and publication of 

beneficial ownership information. In particular, we have used reviews of the procurement 

policies at the World Bank and AfDB to secure commitments from those two institutions on

strengthening their beneficial ownership practices. We support the decisions by the World Bank 

and AfDB boards to require that these institutions collect and publish beneficial ownership 

 

1 Most of the MDBs have a private sector lending arm that provides various financial products (debt, equity, or 

guarantees) to private sector entities. For example, World Bank Group lending to private sector entities (through the 

IFC) in FY15 totaled $11 billion or 18% of total World Bank Group FY15 financial commitments.

2 World Bank lending to sovereign governments totaled $43 billion in FY15 or 71% of total World Bank Group 

FY15 financial commitments.
information, and we are continuously looking for opportunities to press them and the remaining 

MDBs to collect and publish beneficial ownership information. 

II. Beneficial Ownership Practices at the MDBs

World Bank Group 

For its sovereign lending operations (through the International Bank for Reconstruction and 

Development or “IBRD”, and the International Development Association or “IDA”), the World 

Bank is preparing to launch a pilot system for fiscal years 2018 through 2020, whereby it will 

collect and publish beneficial ownership data for all procurements related to World Bank 

projects over certain thresholds (about 40 percent of Bank procurements by value).3 

Under the pilot program, the World Bank’s standard bidding document will be amended, and 

winning bidders will be required to provide beneficial ownership information using a template 

set by the World Bank. The winning bidder will be required to identify beneficial owners using 

thresholds for determining ownership and definitions of control developed by FATF. The 

information will then be published on the World Bank’s website/systems as well as the winning 

bidder’s website. Online publication is important so that interested stakeholders, including local 

citizens and members of civil society, can engage with the bank and their respective government 

on the information in the report and verify its accuracy. The World Bank will review and report 

back to the Board on this pilot in fiscal year 2020, before then determining a future direction. 

Although the World Bank is not actually a party to these contracts—the contracts are between 

the borrowing government and the company that wins the procurement bid—the winning 

companies are subject to the World Bank’s anti-fraud and corruption requirements; and, if a 

company misrepresents beneficial ownership information, this will be considered noncompliance 

and be reported to the Integrity Vice Presidency. The misrepresentation could be subjected to a 

fraud investigation and lead to the company’s debarment. Treasury, together with the U.S. 

Executive Director’s office, has met with World Bank officials several times to encourage a 

timely roll out of the pilot, and we plan further engagement with them as the pilot is finalized.

International Finance Corporation

The International Finance Corporation (IFC) invests in private sector entities conducting 

business in emerging markets and developing countries. Before it makes an investment, the IFC

identifies all parties with a substantial interest in the entity being considered for an IFC 

engagement. Generally, the IFC identifies and conducts integrity due diligence (IDD) on those 

individuals who own or control 5 percent or more of an entity, including indirect and beneficial 

owners, as well as the top five direct owners as applicable. If the company is a fund, it must also 

conduct IDD on the general partner (GP) or fund manager, even if the GP/fund manager does not 

 

3 These thresholds are longstanding triggers for prior reviews by the Bank procurement team to ensure that the 

borrower is complying with Bank procurement policies. The thresholds are country specific and basically an 

approximation by the Bank to determine when a public procurement is considered “significant”. While a prior 

review is being conducted, the borrower cannot proceed with the procurement process until it gets an all-clear from 

the Bank.
meet those thresholds, as well as the GP/fund manager’s direct owners down to the five percent 

level and top five owners. 

IFC staff conducts due diligence to identify whether there are any integrity risks in the project. 

The IFC defines “integrity risk” as the risk of engaging with entities or persons whose 

background or activities may have adverse reputational and, often, financial impact on IFC. The 

IFC posts project descriptions on its website, which may also include the names of sponsors and 

major shareholders in the company, including some beneficial ownership information, but 

generally the IFC does not publish beneficial ownership information. 

European Bank for Reconstruction and Development

Similar to the IFC, the European Bank for Reconstruction and Development (EBRD) invests in 

private sector entities and conducts risk-based IDD on these companies. EBRD staff is 

responsible for collecting and vetting beneficial ownership information based on information 

gathered through site visits, discussions with the client, and general knowledge of the 

region/sector, as well as internet and Bank for International Settlements searches. In more 

complex cases the EBRD will commission a confidential external due diligence report. It will 

not proceed with a transaction without knowing who the beneficial owners are. Additionally, 

investments that involve politically exposed persons, clients with poor past business practices, or 

other high risk clients will trigger enhanced IDD. The EBRD publishes information on its 

project partners, but does not necessarily provide beneficial ownership information. 

African Development Bank

The AfDB Board of Directors approved a revised procurement policy in 2015 that provides for 

an improved approach to the collection and publication of beneficial ownership information. For 

this purpose, the AfDB is developing a guidance note on beneficial ownership and politically 

exposed persons, which will be part of the Procurement Toolkit that the AfDB is developing for 

the implementation of its revised procurement policy. In addition, the AfDB Operations 

Procurement Manual is under development and the United States will continue to engage with 

AfDB management to encourage the manual be rolled out as soon as possible. 

The anticipated guidelines will require that a successful bidder under an AfDB-financed contract 

above a specified monetary threshold to disclose publicly its beneficial owners. Beneficial 

owners are defined as any individual - or closely related individuals - who own or control 10 

percent or more of the voting shares of the firm. Solicitation and request for proposal (RFP) 

documentation will require winning bidders or proposers to agree to identify beneficial owner(s), 

including politically exposed persons. The AfDB will consider the failure to provide this 

information or the provision of incorrect information as grounds for misrepresentation and may 

result in disqualification or other appropriate sanctions. The Bank also conducts due diligence 

for non-sovereign entities that it identifies as a potential partner, taking into consideration the 

provisions of its Integrity Due Diligence Policy on Non-Sovereign Operations and other 

applicable Bank policies and procedures. Specifically, the aim is to conduct enhanced due 

diligence to verify and ensure the identification of the source of funds being received or to be 

received by the Bank. The AfDB’s new commitment to advance beneficial ownership 
transparency is commendable, and we will continue to work with the institution as it implements 

the new guidelines. 

Asian Development Bank

The AsDB’s requirements related to beneficial ownership are focused on its private sector 

operations. Under AsDB rules, the project team is expected to identify 100 percent of the 

beneficial ownership of a company. AsDB staff then carries out a desk review of the potential 

client through searches of Lexis Nexis, World Check, Factiva, Dow Jones Risk and Compliance, 

and various internet research engines. Additionally, staff screen potential counterparties against 

the UN Security Council Committee consolidated sanctions list, the Office of Foreign Assets 

Control (OFAC) Specially Designated Nationals & Blocked Persons Lists, as well as other 

sanctions lists. 

Where there are shareholdings of less than five percent that are not identified or remain unknown 

(where shareholdings of more than 10 percent aren’t identified, the Board is notified), the Board 

will be informed. In sovereign operations projects where the executing agency or implementing 

agency is not a government ministry or agency, there is also a requirement to identify any 

beneficial owner that is not state owned. 

Inter-American Development Bank

For the IDB’s sovereign operations, funds are lent to borrowing governments (who then enter 

into procurement contracts with companies). The procurements are done in accordance with 

IDB procurement policies, but the IDB is not a party to those contracts. The IDB publishes all 

procurement data for contract award winners on its website including the name of the firm, its 

location and the value of the contract, but this information does not include beneficial ownership 

data.

Inter-American Investment Corporation

The IIC is the private sector arm of the IDB. It lends to and invests in private sector companies 

that conduct business in its borrowing member countries. The IIC identifies and conducts IDD 

on entities and individuals who own or control directly or indirectly five percent or more of an 

entity (ten percent in the case of a publicly traded company). If the company is a fund, IIC also 

conducts IDD on the GP/fund manager, even if the GP does not meet that threshold, as well as 

the GP/fund manager’s direct and indirect owners down to the five percent level. IIC screens 

these beneficial owners through relevant databases for integrity risk indicators, such as being 

considered a politically exposed person, being subject to economic or administrative sanctions, 

or being under criminal investigation or involved in administrative or civil proceedings that 

allege serious ethical or financial misconduct. The IIC defines “integrity risk” as the possibility 

that a person or entity engages in serious ethical or financial misconduct in connection with an 

IIC operation. Failure to provide information on beneficial owners disqualifies a company from 

receiving funding from IIC (although there is an exception under the guidelines for clear 

mitigating circumstances, IIC in practice has never granted an exception). 
In 2016, the IIC strengthened its Integrity Framework, in particular its due diligence procedures 

regarding tax information exchange risk related to companies or their “controlling shareholders” 

(defined as the power to direct the management or policies of the company through ownership, 

contract, or otherwise). The Office of the U.S. Executive Director (OUSED) arranged for a 

Deputy Assistant Secretary for Tax Policy from the U.S. Treasury to brief the Board of Directors 

and management on best practices with respect to due diligence, and the OUSED was heavily 

involved in discussions regarding updating the Integrity Framework. The IIC also posts project 

descriptions on its website, which may also include the names of sponsors and major 

shareholders in the company, including some beneficial ownership information.

Conclusion

Several of the MDBs have made significant strides in recent years to reduce risk and ensure the 

integrity of their institutions though the collection of beneficial ownership information. In 

particular, the World Bank and the African Development Bank have taken steps to collect and 

publish beneficial ownership information for procurement in sovereign projects. As noted 

above, the United States strongly supported these efforts. Collecting and publishing this 

information will significantly increase the ability of MDBs to track who is receiving MDB 

financing and may encourage greater transparency on the part of other international or country 

institutions as well. In the coming year, we will encourage the other MDBs to adopt a similar 

standard.