Reliance on banks has been hindering investigations into financial crime according to Transparency International (TI), which is calling for five key fixes to ensure that the new Financial Action Task Force (FATF) global standard on beneficial ownership transparency is effective.
The anti-corruption organisation is responding to the release by the FATF of a white paper for public consultation on the transparency and beneficial ownership of legal persons to strengthen measures that will prevent criminals from hiding illicit activity and proceeds, (Trade-based Financial Crime, 2 July 2021, FATF seeks financial institution and other stakeholder views as it mulls changes to international standards on beneficial ownership).
Over-reliance on banks and DNFBPs
Financial institutions and designated non-financial business and professions (DNFBPs) such as real estate agents, accountants and lawyers play an important role in anti-money laundering TI says.
But its first fix calls for competent authorities concerned with countering money laundering not to over-rely on banks and DNFBPs. Crucial though the information they collect is, they cannot be the only source of information. Moreover, the information they provide is not always verified or accurate TI says.
Clear definitions and accurate data
In its second fix, TI is calling for a strong and clear definition of beneficial ownership. It wants one single beneficial ownership definition in a given jurisdiction that applies to company registration, customer due diligence and any other sectoral disclosure requirements.
In its third fix, TI points out that while FATF’s recommendations already require accurate and up-to-date information there should be specific requirements on how countries should achieve this. Moreover, TI wants to see data collected beyond a beneficial owner’s date of birth, address, place of residence, nationality and information on an entity’s shareholders and directors.
Anonymity and foreign ownership
TI wants to see loopholes closed that allow anonymity in its fourth fix. Specifically, the anti-corruption organisation is concerned about the use of bearer shares and nominee shareholders and other instruments that can be used by the corrupt and other criminals to move, hide and launder illicitly acquired assets.
In its final fix, TI calls for increased transparency of foreign ownership because very often a foreign company may make investments in a country, such as accessing government contracts, purchasing real estate or opening bank accounts without having to register with the country’s company register or disclose its beneficial owners.
More details of Transparency Internationals’ five fixes for ensuring that the new global standard on beneficial ownership transparency is effective can be found here.
Categories: Trade Based Financial crimes News