Feature: Update to the entity classification system

[Blueskies00]

[This ticket helps track progress towards developing a particular feature in BODS where changes or revisions to the standard may be required. It should be placed on the BODS Feature Tracker, under the relevant status column.

See Feature development in BODS in the Handbook.

The title of this GitHub ticket should be 'Feature: XXXXX' where XXXXX is the feature name below. The information in this first post on the thread should be updated as necessary so that it holds up-to-date information. Comments on this ticket can be used to help track high-level work towards this feature or to refine this set of information.]

Feature name: Update to the entity classification system

Feature background

Briefly describe the purpose of this feature

In BODS, entity types are captured at a high level in a codelist. In BODS v0.3, the schema was updated to include an entity subtype field and codelist for further defining state bodies. There was also the introduction of a public listing object to capture further relevant details in such cases.

Currently the definitions used in BODS such as “registeredEntity” and “legalEntity” do not align with common usage in other related standards such as the FATF Recommendations. This causes confusion and adds a layer of complexity to using the standard - especially when considering the international use of BODS.

The BODS entity type “arrangement” is another area that could be considered too broad, at least without the ability to note further details in a standardised format. An update to the classification system will better allow cases such as trusts, nominee arrangements and contract based agreements to be represented. These are areas that are currently less focussed on in BOT reforms due to their nature.

Entities can also have intrinsic values that are not mutually exclusive to each other, which the current classification system does not facilitate - for example a publicly listed company is likely also to be a registered entity. They may also have statuses - such as being state-owned - which can change over time and that are not determined directly by their legal form.

There are many different forms that entities can take in different jurisdictions and it will be important to get the correct level of abstraction in the structure. That is, to what level of detail does BODS support a shared classification of legal forms across jurisdictions, and to what level of detail does it support publishing of information about local legal forms.

What user needs are met by introducing or developing this feature in BODS?

User stories include:

• As an implementer I want to be able to publish precise information about entities’ local legal forms so that the comprehensive coverage of our declaration framework is apparent.

• As an implementer, I want to be able to see how cleanly our legal forms of entity map onto BODS categories so that I can judge how useful it will be to publish in BODS format.

• As an analyst I want to distinguish between "trusts" and other legal constructs because these have different risk profiles and modelling needs so that I can spot the gaps in a disclosure, verification and enforcement regime.

• As an analyst I want details on entity forms so that I can review global trends and patterns relating to structures used in beneficial ownership chains.

What impact would not meeting these needs have?

• Disclosing entities may inaccurately report their organisation type resulting in unreliable data

• Detailed analysis would require additional time and research outside of the core dataset

• Identification of the extent of BO mechanisms would be obscured.

• Implementers may choose not to use BODS if it doesn’t provide locally-useful information about legal forms.

• BODS would not adequately support Open Ownership’s principle of comprehensive coverage.

How urgent is it to meet the above needs?

Beneficial ownership is becoming more prominent globally and as it becomes more prevalent the scope of coverage within countries is also growing - from industry specific to full economy. As more countries look to gather information in this domain the nuances of each jurisdiction become more distinct meaning it is important that BODS is able to seamlessly represent a country's data without losing valuable information. By better representing entity types in BODS compliance with the standard will be easier for implementers, and the more use globally the more value will be gained from the interoperability of BODS.

Are there any obvious problems, dependencies or challenges that any proposal to develop this feature would need to address?

• There is a risk of too rigidly defining entities which may not be applicable in every instance or jurisdiction.

• Any substantial changes will require consideration of compatibility mapping for data published using older BODS versions.

Feature work tracking

These Github issues expand further on this topic: Updates to the entityType codelist / EntityStatement model

Simplify the entity type codelist

Secondary entity classifications and entity type details block