FATF amends Recommendation 24 on beneficial ownership

Monday, 07 March 2022
The global Financial Action Task Force (FATF) has formally amended its Recommendation 24 to require its member countries to collect information on the beneficial ownership of legal persons through a combination of different mechanisms. Member countries will have to hold the information either through a publicly managed registry or an equivalent alternative mechanism.
Transparency

FATF says its recent mutual evaluations of various jurisdictions have shown a ‘generally insufficient level of effectiveness in combating the misuse of legal persons for money laundering and terrorist financing globally’. Both the evolving anti-money laundering (AML) risks and the widely publicised leaks of misuse of shell companies show that the current standards need to be updated, it says.

The formal amendment of the recommendation is the final stage of a two-year process of consultations on proposals, to which STEP has responded. According to FATF, the new rule will ‘significantly strengthen the requirements for beneficial ownership transparency globally, while retaining a degree of flexibility for individual countries to go further in refining individual regimes’.

As well as collecting beneficial ownership information from entities themselves, FATF now says countries should apply extra measures, such as obtaining information held by regulated financial institutions, professionals, regulators and stock exchanges. A risk-based approach should be used to decide if these extra precautions are necessary.

The amended recommendation also imposes further restrictions on bearer shares and more robust transparency requirements for nominee arrangements.

FATF is also reviewing Recommendation 25, which covers the beneficial ownership of legal arrangements other than legal persons. It will begin assessing jurisdictions for implementation of the new requirements at the start of the next round of mutual evaluations.

It has also developed draft guidance on the risk-based implementation of AML and counter-terrorist financing measures in the real estate sector. A public consultation on this guidance is running until 22 April 2022.

Sources

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