Beneficial ownership is a crucial aspect of anti-money laundering (AML) compliance. A beneficial owner of a legal entity or arrangement is the person or persons who have ultimate control over an entity, whether through ownership or other means.
Source: ACAMS report on Beneficial Ownership: Taking the Extra Step to Data Accuracy
The requirement for Beneficial Ownership Registries
The Financial Action Task Force (FATF) requires countries to establish beneficial ownership registries which competent authorities will be able to access in their efforts to identify the beneficial owners of companies and other legal arrangements and combat money laundering and other financial crimes. However, these registries have no use if the information included is not accurate.
The ACAMS report on Beneficial Ownership
Το help countries implement effective beneficial ownership transparency measures, ACAMS, a global professional association for anti-money laundering and financial crime specialists, has published a report titled " Beneficial Ownership: Taking the Extra Step to Data Accuracy”.
Although there is no one “right” approach to ensure that a registry has accurate beneficial ownership information, the report aims to provide a menu of options to policymakers and countries on how to implement effective beneficial ownership transparency measures for legal persons, including companies, foundations, and other legal arrangements.
These options include:
Controls at the time of entity formation: Countries may require complete and accurate beneficial ownership information during the registration of an entity or its formation. Third parties with anti-money laundering (AML) obligations can be involved to collect and verify such information during the process.
Automated cross-checks with other government databases: Comparing beneficial ownership information submitted to the registry with information held in other government databases, such as the tax authority or the financial regulator can help the relevant competent authority to identify discrepancies and inconsistencies.
Verification by independent third parties: Requiring beneficial owners to provide third-party verification of their ownership information, such as a lawyer or accountant can be a reliable verification method, but it can be expensive and time-consuming for both the beneficial owners and the registry.
Beneficial ownership registry internal controls: Authorities responsible for beneficial ownership registries should consider establishing a set of risk-based internal controls to identify inaccurate and/or suspicious activity. These controls may include automated cross-checks with other government databases, verification by independent third parties, and enhanced review of higher-risk entities.
Leveraging financial institutions and designated non-financial businesses and professionals (DNFBPs): Financial institutions and DNFBPs may be required to report beneficial ownership information on their customers to the registry. This can be an effective way to collect information on a large number of legal entities, but it is important to ensure that financial institutions and DNFBPs have adequate safeguards in place to protect the privacy of this information.
Leveraging the public and civil society: Making beneficial ownership information publicly accessible and engaging with the public and civil society can help identify and report suspicious activity. This can be an effective way to promote transparency and accountability, but it is important to ensure that safeguards are in place to protect the privacy of beneficial owners.
The paper also three structural enhancements to ensure more accurate beneficial ownership information. These include:
Greater accountability for authorities responsible for beneficial ownership registries:
More resources devoted to beneficial ownership registries
More enforcement for intentionally inaccurate or incomplete information.
ACAMS's report provides valuable insights for policymakers and countries on how to implement effective beneficial ownership transparency measures.
You can read the ACAMS report here