Financial institutions are amongst stakeholders the Financial Action Task Force (FATF) is seeking views from in its review of its Recommendation 25 (R25) on the transparency and beneficial ownership (BO) of legal arrangements.
The objective of the review is to improve R25 and its interpretive note to better meet its objective to prevent the misuse of legal arrangements for money laundering or terrorist financing.
The FATF says it wants to hear from a range of stakeholders, including trustees, designated non-financial businesses and professions, and non-profit organisations as well as financial institutions.
The task force says it would welcome comments in particular on questions related to the scope of legal arrangements, risk assessment and foreign trusts as well as the obligations of trustees under R25.
Beneficial owners and ownership
The FATF defines beneficiaries and beneficial owners differently and is looking into whether a clarification of the definition of beneficial owner in the case of legal arrangements is warranted.
The task force wants to know if stakeholders would support the insertion of a standalone definition for beneficial owner in the context of legal arrangements that is distinct from that for legal persons or whether this would it risk creating confusion.
Obstacles to transparency
Given the potential complexities of legal arrangements, the FATF would like to gather input on how legal arrangements such as complex ownership structures could be misused for money laundering or terrorist financing purposes.
It would also like to identify features of legal arrangements being used for obscuring ownership and determine what the key obstacles to transparency of trusts and other legal arrangements are.
Collecting BO information
The task force is considering ways to strengthen the requirement for countries to have access to BO information in respect of legal arrangements and contemplating whether countries should be required to use mechanisms besides trustees.
This would include, for example, a public authority or body holding information on the beneficial ownership of trusts or similar legal arrangements; information collected by other competent authorities, or information collected by other agents or service providers.
The FATF is asking for responses, including any drafting proposals by 1 August 2022 ahead of the presentation of views received and proposed revisions to the text of R25 for discussions at its October 2022 meetings.
Further information on FATF’s potential revision of R25 along with links to relevant documentation can be found here.
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