FATF prepares tightening of beneficial ownership rules

The amendments would require all countries to assess and mitigate the anti-money laundering risks of certain legal persons created in foreign countries, as well as the current requirement of all legal persons created within the country. FATF considers this extension to be necessary because of the use of cross-border ownership structures to conceal beneficial ownership, but acknowledges there are practical issues regarding the identification and risk assessment of foreign-created legal persons. It is therefore seeking a risk-based approach that limits the measure's scope to foreign-registered legal persons who have 'sufficient' links with the countries. The consultation asks for comments on what should be considered a ‘sufficient’ link.

Another of FATF’s proposed amendments relates to 'multi-pronged' approaches to the collection of beneficial ownership information. FATF is considering what elements should be included in a multi-pronged approach and what supplementary measures should be considered for inclusion, based on the experiences of countries that have beneficial ownership registries. The consultation accepts that centralised registries are not the only solution and is asking for comments on the key benefits and disadvantages of alternative approaches, such as requiring companies, financial institutions and non-financial professionals to hold the beneficial ownership information.

Other aspects of the consultation include:

• improving the adequacy, accuracy, and timeliness of the information;
• ensuring that competent authorities have easy access to the information while protecting confidentiality of the data subjects; and
• implementing stronger controls on the use of bearer shares and nominee directors and shareholders.

FATF is particularly interested in the views of companies and other legal persons. The text of the recommendation will be reviewed and discussed at the FATF meetings in October 2021.

'STEP agrees with FATF's aim to increase transparency and encourage rigorous safeguards, which will help combat financial crime, including tax evasion,' says Emily Deane TEP, STEP Technical Counsel. 'However, transparency should have appropriate and legitimate boundaries and rigorous safeguards and robust mechanisms must be in place, mainly when trust information is accessible to anyone other than the competent authority. STEP has been engaging with FATF on its review of Recommendations 24 and 25 and will be responding to the consultation.'

Sources

• FATF
• FATF (Consultation paper, PDF)
• STEP (Consultation response, PDF)