“Anonymous shell companies are one of the most widely used methods for laundering the proceeds of crime and corruption,” according to the Financial Action Task Force (FATF).

In response, the global money laundering watchdog has issued a new best practice paper on beneficial ownership for legal persons.

According to FATF, many jurisdictions are still finding it challenging to ensure transparency of ownership of legal persons.

Eliminate secrecy

The new paper is intended to help countries eliminate what FATF describes as the “cloak of secrecy” concerning the ultimate owner of a company, foundation, association or any other legal person, and prevent their misuse for crime and terrorism.

The paper follows the FATF’s 2003 standards on beneficial ownership, which required jurisdictions to ensure their authorities could obtain up-to-date and accurate information about the people behind companies, foundations and other legal persons. These requirements were further strengthened and clarified in 2012.

Challenging transparency

But according to FATF, their evaluations have shown that many jurisdictions are still finding it challenging to ensure transparency of ownership of legal persons, and to effectively prevent criminals and terrorists from hiding their identity and illegal activities behind seemingly legitimate activity.

The paper identifies the most common challenges that countries face in ensuring that the beneficial owners of legal persons are identified, and suggests key features of an effective system.

The paper also suggests options for jurisdictions to obtain beneficial ownership information of overseas entities.

FATF’s best practice paper on beneficial ownership is available here.

Categories: Trade Based Financial crimes News