The FATF has published a best practice paper entitled “Best Practices on Beneficial Ownership for Legal Persons”. The paper is intended to provide jurisdictions with assistance in implementing systems that ensure transparency of ownership of legal persons, helping countries to “get rid of 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”. In particular, the paper advocates for the deployment of a “multi-pronged approach” using several sources of information.
What does a “multi-pronged approach” entail? FATF recommendation 24 indicates that countries should ensure that there is adequate, accurate and timely information on the beneficial ownership and control of legal persons that can be obtained or accessed in a timely fashion by competent authorities. The interpretative note to FATF recommendation 24 goes on to state that this can be achieved through one or more of the following approaches:
The Registry Approach: which requires companies or company registries to obtain and hold up-to-date information on the companies’ beneficial ownership;
The Company Approach: which requires companies to take reasonable measures to obtain and hold up-to-date information on the companies’ beneficial ownership;
The Existing information Approach: which entails the use of existing information collected through various mechanisms such as CDD performed by financial institutions and DNFPBs, information held by other competent authorities, information maintained by companies and information available on stock exchanges.
The FATF paper effectively recommends the combination and strengthening of each of these three approaches. In particular FATF recommends the launch of company registers that accurately cite beneficial owners, impose more stringent recordkeeping obligations on legal entities and bolster the quality of existing records held by financial institutions, tax authorities, company formation agents, lawyers and trust-and-company-service providers, among others.
The full paper can be accessed here