FATF Adopts Amendments to Recommendation on Beneficial Ownership

On March 4, the Financial Action Task Force (FATF) adopted amendments to Recommendation 24 and its Interpretive Note which require countries to prevent the misuse of legal persons for money laundering or terrorist financing and to ensure the provision of adequate, accurate and up-to-date information on the beneficial ownership and control of legal persons.

These amendments are the result of a two-year period of consideration of previous FATF standards on beneficial ownership of legal persons, aimed at achieving greater transparency about the ultimate ownership and control of legal persons and mitigation of risks of their misuse. FATF Mutual Evaluations show a generally insufficient level of effectiveness in combating the misuse of legal persons for money laundering and terrorist financing globally, and that countries need to do more to implement the current standards.

Principles Stipulated by Recommendation 24

1) A multi-pronged approach: use of a combination of different mechanisms for collection of beneficial ownership information to ensure it is available to competent authorities in a timely manner.

It is the obligation of the countries to ensure that their companies obtain and hold adequate, accurate and up-to-date information on their own beneficial ownership and make such information available to competent authorities in a timely manner.

Countries should also require beneficial ownership information to be kept by a public authority or beneficial ownership registry. An alternative mechanism may also be applied if it also provides efficient access to beneficial ownership information by competent authorities.

Moreover, countries should apply any additional supplementary measures, such as holding beneficial ownership information obtained by regulated financial institutions and professionals, or held by regulators or in stock exchanges.

2) A risk-based approach: countries must assess and address the risk posed by legal person, not only by those created in their countries, but also by foreign-created persons which have sufficient links with the corresponding country. The changes also specify that access to information by competent authorities should be timely and accurate.

The revisions require countries to ensure that public authorities have access to beneficial ownership information of legal persons in the course of public procurement, with stricter control over bearer shares and nominee arrangements, including prohibiting the issuance of new bearer shares and bearer share warrants and conversion or immobilisation of the existing ones.

Effect of Amendments and Further Steps

The FATF will analyse the practical experience of implementing beneficial ownership registries, with a view to identifying best practices used by countries to fight concealment of beneficial ownership of legal persons. It will also begin the process of revising its methodology for assessing these new obligations.

The organisation is also reviewing Recommendation 25 on beneficial ownership of legal arrangements, in order to control the fact that relevant beneficial ownership standards remain consistent. Specifically, the FATF will begin assessing jurisdictions for implementation of the revised requirements, allowing the countries time to introduce corresponding provisions into their national legislations.

Source:

FATF’s Communication