FATF Updated Guidance on Beneficial Ownership of Legal Persons
FATF Updated Guidance on Beneficial Ownership of Legal Persons
The Financial Action Task Force (FATF), an international organization that establishes standards and promotes effective implementation of legal, regulatory, and operational measures to combat money laundering, terrorist financing, and other related threats, has recently updated its guidance on beneficial ownership of legal persons. This new guidance aims to further strengthen the global fight against financial crime by ensuring greater transparency and accountability in the ownership structures of legal entities.
What is Beneficial Ownership?
Beneficial ownership refers to the natural person(s) who ultimately own, control, or benefit from a legal entity, such as a company, a partnership, or a trust. It is an important element in combating financial crime as it helps to identify the individuals behind a company or entity and to detect and prevent illicit activities, such as money laundering, corruption, tax evasion, and terrorist financing. However, some legal entities are structured in a way that obscures their beneficial ownership, making it difficult for authorities to trace the flow of funds and to hold accountable those responsible for illicit activities.
New FATF Guidance
The new FATF guidance on beneficial ownership of legal persons provides a framework for countries to improve transparency and accuracy of beneficial ownership information. It recommends that countries should:
- Collect beneficial ownership information and ensure it is accurate and up-to-date: Countries should ensure that all legal persons incorporated within their jurisdiction obtain and maintain up-to-date information on their beneficial ownership.
- Share beneficial ownership information with competent authorities: Countries should ensure that competent authorities, such as law enforcement agencies, financial intelligence units, tax authorities, and supervisory bodies, have timely access to accurate and up-to-date beneficial ownership information.
- Make beneficial ownership information accessible to the public: Countries should consider making beneficial ownership information publicly accessible, subject to appropriate safeguards to protect the privacy and security of the information and the individuals concerned.
- Verify beneficial ownership information: Countries should verify the information provided on beneficial ownership and take measures to mitigate risks of fraudulent information.
- Regulate and supervise agents that provide beneficial ownership information: Countries should ensure that agents, such as lawyers, accountants, trust and corporate service providers, who provide beneficial ownership information on behalf of legal persons and arrangements, are subject to effective regulation and supervision.
- Understand and manage the risks associated with anonymity: Countries should understand and manage the risks associated with anonymous ownership, nominee arrangements, bearer shares, and other mechanisms that can obscure beneficial ownership.
Expected Impact
The updated guidance from the Financial Action Task Force (FATF) on beneficial ownership of legal persons is expected to have a significant impact on the global financial industry. The guidance, which was issued in February 2020, sets out new standards for identifying and verifying the beneficial owners of legal entities, with the aim of preventing money laundering and terrorist financing.
Under the updated guidance, financial institutions and other entities will be required to gather more detailed information on beneficial owners, including their name, date of birth, address, and national identification number. The guidance also includes a new requirement for ongoing monitoring of beneficial ownership information, to ensure that it remains up-to-date and accurate.
The impact of this updated guidance is likely to be felt across the financial industry, as compliance with the new standards will require changes to existing processes and systems. Some financial institutions may struggle to meet the new requirements, which could result in increased compliance costs and a greater administrative burden. At the same time, the updated guidance is likely to improve the ability of financial institutions and law enforcement agencies to detect and prevent financial crime.