Addressing Transparency of Beneficial Ownership in Financial Action Task Force 40 Recommendations

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The Financial Action Task Force (FATF) is an intergovernmental organization that sets international standards and promotes effective implementation of legal, regulatory, and operational measures for combating money laundering, terrorist financing, and other related threats to the integrity of the international financial system. The FATF has issued a set of 40 Recommendations that provide a comprehensive framework for anti-money laundering and counter-terrorist financing (AML/CFT) efforts.

One of the key areas addressed by the FATF 40 Recommendations is the transparency of beneficial ownership. Beneficial ownership refers to the individuals or entities that ultimately own or control a legal entity or arrangement. This information is crucial in identifying and mitigating the risks of money laundering, terrorist financing, and other illicit activities.

The FATF 40 Recommendations address beneficial ownership transparency by requiring countries to ensure that accurate and up-to-date information on the beneficial ownership of legal persons and arrangements is accessible to competent authorities in a timely manner. Specifically, Recommendation 24 requires countries to:

• Take measures to prevent the misuse of legal persons for money laundering or terrorist financing, including ensuring that accurate and up-to-date information on the beneficial ownership of legal persons is available to competent authorities in a timely manner.
• Take measures to prevent the misuse of legal arrangements for money laundering or terrorist financing, including ensuring that accurate and up-to-date information on the settlor, trustee, and beneficiaries of trusts is available to competent authorities in a timely manner.
• Ensure that financial institutions, designated non-financial businesses and professions (DNFBPs), and other persons or entities that are required to conduct customer due diligence (CDD) measures have access to accurate and up-to-date information on the beneficial ownership of their customers.
• Ensure that competent authorities can access information on the beneficial ownership of legal persons and arrangements in a timely manner, including through the establishment of centralized registries or other appropriate mechanisms.

In summary, the FATF 40 Recommendations require countries to implement measures to ensure that accurate and up-to-date information on the beneficial ownership of legal persons and arrangements is accessible to competent authorities and other relevant parties, including financial institutions and DNFBPs, in a timely manner. This is intended to enhance transparency and mitigate the risks of money laundering, terrorist financing, and other illicit activities.