Guidance issued to help firms adopt "challenging" global transparency recommendations

The 2012 FATF Recommendations, which are the internationally-recognised global standards on money laundering and terrorist financing, contain measures designed to deter and prevent the misuse of corporate vehicles for illicit purposes. The FATF said that the new guidance would help national governments to comply with recommendation 24; on the transparency and beneficial ownership of legal persons, and recommendation 25, on the transparency and beneficial ownership of legal arrangements.

"The appeal to criminals lies in the fact that corporate vehicles can be misused to circumvent controls by disguising the identity of known or suspected criminals and the source of funds or assets," the FATF said. "The misuse of corporate vehicles could be significantly reduced if accurate information regarding both the legal owner and the ultimate beneficial owner, the source of the corporate vehicle's assets, and its activities were readily available to the authorities."

"While the transparency and beneficial ownership requirements of the FATF Recommendations are aimed at fighting money laundering and the financing of terrorism, they also support efforts to prevent other serious crimes such as tax crimes and corruption. The FATF's role as the standard setter on beneficial ownership was echoed in the actions taken by global leaders such as the G20 leaders' commitment to implement the FATF standards on beneficial ownership," it said.

The FATF's new guidance (48-page / 1.2MB PDF) was prompted by feedback from governments that implementing its recommendations on transparency and beneficial ownership had been "challenging".

The UK government is consulting on its proposals (41-page / 419KB PDF) to create a public list of those who are beneficial owners of companies, the 'people with significant control' (PSC) register.

"The PSC register will hold information on PSCs and the way they exercise control over the company. This will help searchers of the register build a picture of the company’s ownership and control structure," its proposal said. "It would be possible for Government not to make regulations, leaving companies a free hand in what is entered in the register. However, the need for consistency, clarity and simplicity argues for a degree of prescription."

The FATF Recommendations, which have been endorsed by the G8 group of leading global economies, require national governments to make legal persons and legal arrangements "sufficiently transparent" and to implement measures which would make accurate and up-to-date beneficial ownership information available quickly to the relevant authorities. Beneficial ownership refers to individuals and interests that hold a certain amount of a company's shares or voting rights, or that otherwise control the way that the company is run.

The new guidance recommends that national governments should obtain and record basic information on companies as part of their company registration processes, and that this information should be made publicly available. Companies should be required to provide the registered office address and a register of shareholders or members, and this information should be kept accurate and up to date. National governments should also introduce sanctions for non-compliance, the FATF said.

National governments should also require trustees to disclose their status to financial institutions when forming a business relationship, and require professional trustees to keep records of any information they hold for at least five years after their involvement with the trust ends, the FATF said. Countries may also choose to establish national registries, such as a central registry of trusts including information on trust settlors and beneficiaries, the FATF said.

Adopting the FATF Recommendations last year, leaders of the G8 committed to keeping registers of the beneficial owners of the companies operating in their territories, and to making this information available to national law enforcement and tax administration authorities. They also intend to provide basic company and beneficial ownership information from authorities in other countries "upon request". The UK government intends to make its planned publicly-accessible central registry of company beneficial owners, which will be maintained by Companies House, publicly available.