Stakeholders respond to the FATF consultation on transparency and beneficial ownership draft amendments

Several stakeholders have commented on the Financial Action Task Force (FATF) draft amendments to its Recommendation 25 (R25) on the transparency and beneficial ownership of legal arrangements (Trade-based Financial Crime, 29 June 2022).

Financial institutions are amongst those stakeholders the FATF is seeking views from as it works towards its objective to improve R25 and its interpretive note to better prevent the misuse of obscure beneficial ownership and legal arrangements for money laundering or terrorist financing.

Central registries crucial

Transparency International (TI) opens its comments by underlining the importance of requiring beneficial ownership information to be collected centrally by a public authority or body such as a company register, beneficial ownership register or tax register. “Registers with beneficial ownership information have proven to be the best approach for ensuring information is available in a timely manner to competent authorities,” TI says in its comments.

But TI, along with Open Ownership and the Financial Accountability and Corporate Transparency (FACT) Coalition, have all expressed concerns about the challenges of ensuring adequate, up-to-date, and timely information in the absence of central registration for trusts and other similar arrangements.

Banks’ ‘complementary’ role

Relying on agents and service providers to collect, store, and provide trust and similar legal arrangement ownership information creates a potential conflict of interest and could create unnecessary barriers to timely access to information by competent authorities according to the FACT coalition.

Financial institutions and designated non-financial business professionals (DNFBPs), or gatekeepers, can play a complementary role, but a central authority is the prime requirement the coalition suggests.

Access to information

It is also encouraging the FATF to consider requirements to make beneficial ownership information of trusts and legal arrangements public, or at least accessible for other data users responsible for combating financial crimes.

Financial institutions, competent authorities, non-AML regulated businesses who engage with trusts, journalists, and civil society should certainly be able to access beneficial ownership information.

The Institute of International Finance (IIF) agrees with this notion in its comments. “Access by competent authorities and financial institutions to reliable and verified beneficial ownership information remains a global priority,” it says.

Transparency International’s response to the FATF consultation on draft amendments to Recommendation 25 can be found here.

The FACT Coalition’s response to the FATF consultation on draft amendments to Recommendation 25 can be found here.

Open Ownership’s response to the FATF consultation on draft amendments to Recommendation 25 can be found here.

The IIF’s response to the FATF consultation on draft amendments to Recommendation 25 can be found here.

 

 

 

 



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