FATF releases draft recommendation for compulsory recording of beneficial ownership
The proposed changes, which follow the public consultation held earlier in 2021, will require countries to establish a compulsory beneficial ownership registry or an alternative system that also enables access by competent authorities to 'accurate, adequate and up-to-date' beneficial ownership information. They propose a multi-pronged approach to collection of the information, along with measures to prevent the abuse of bearer shares and nominee arrangements.
The draft revisions propose a compulsory company approach to the collection of beneficial ownership information, as well as a requirement for a public authority or body such as a beneficial ownership registry or alternative mechanism to hold such information. Countries will be permitted to decide what form of registry or alternative mechanisms they will use to enable access to information by competent authorities and should document the reasons for their decision on the basis of 'risk, context and materiality'. The chosen method will have to provide the authorities with rapid and efficient access to adequate, accurate and up-to-date information and countries should designate and make publicly known the agency responsible for responding to all international requests for beneficial information.
Countries should also use any additional supplementary measures that are necessary to ensure the beneficial ownership of a company can be determined, such as information held by regulators or stock exchanges or obtained by financial institutions (FIs) or designated non-financial businesses and professions (DNFBPs). Countries should also consider facilitating timely access to the information by FIs and DNFBPs as well as the public, says FATF.
‘Countries should not place unduly restrictive conditions on the exchange of information or assistance’, the proposed amendments note, for example refusing a request on the grounds that it involves tax matters or bank secrecy. ‘Information held or obtained for the purpose of identifying beneficial ownership should be kept in a readily accessible manner in order to facilitate rapid, constructive and effective international cooperation.’
FATF suggests that bearer shares without any traceability and associated warrants should be subject to additional controls, without inadvertently applying excessive controls to traceable and legitimate uses of such instruments. The consultation asks if countries should prohibit the issue of new bearer shares or bearer share warrants and force the conversion or immobilisation of existing bearer shares within a 'reasonable timeframe'. It also asks if nominee arrangements should be subject to certain disclosure and licensing requirements.
Under the proposals, countries would be required to assess the money laundering risks associated with foreign-created legal persons that have 'sufficient links' with their country and take appropriate steps to manage and mitigate those risks. FATF also proposes that a risk-based approach should be applied to verification of beneficial ownership information. Certain limits should be placed on competent authorities' access to beneficial ownership information, to take account of concerns relating to privacy, security and other potential misuse of the information.
Responses must be submitted to FATF by 3 December 2021.
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