The problem therefore seems to go beyond the “simple” question of the specificity of the rules. In July 2021, the EU presented an “ambitious package of legislative proposals” to strengthen and harmonise anti-money laundering and countering the financing of terrorism rules in member states, including transparency requirements for beneficial owners. It is hoped that, combined with the ongoing revisions of the relevant FATF standards, at least high-risk countries will begin to understand and act on the crucial role of beneficial ownership registries in preventing and combating money laundering and terrorist financing. However, both jurisdictions suffer from beneficial ownership transparency systems, which were rated effective at 0% in the latest FATF assessment. This is due to the nature of money laundering, which involves concealing the criminal origin of money and taking a number of measures to introduce it into the financial system and make it appear legal. Criminals often use complex “layers” of corporate legal structures that span multiple jurisdictions to hide the illicit origin of their money. While the FATF Recommendations on transparency and beneficial ownership aim to combat money laundering and terrorist financing, they also support efforts to prevent other serious crimes, such as tax crime and corruption. The FATF`s leading role in setting beneficial ownership standards has been reflected in the actions of world leaders, such as the G20 leaders` commitment to implement the FATF beneficial ownership standards. For entrepreneurs setting up a business, beneficial ownership reporting obligations can take different forms. The data also suggest that the non-binding nature of the FATF Beneficial Ownership Recommendations leaves a great deal of flexibility in how jurisdictions transpose them into their national legislation. Is this the reason for the uneven and late implementation? Most economies still do not require legal entities to disclose beneficial ownership information within a specific time frame Far from being a purely technical issue, beneficial ownership is also increasingly demanded by the public in the wake of scandals such as the Panama and the Paradise Papers.
These revealed how anonymous shell companies were abused (and in many cases deliberately created for this purpose) to help criminals and professional money launderers conceal the proceeds of corruption and other crimes. As explained above and repeatedly highlighted by the FATF, this lack of effective collection and verification of beneficial ownership information on a corporate vehicle hinders efforts by law enforcement authorities and financial institutions to prevent or investigate abuses of the financial system. Legal entities and entities are essential to the conduct of business and are used for a variety of purposes. In order to allow for the widest possible use of company vehicles, countries are putting in place various types of legal entities and agreements with changing structures. However, these complex structures, as provided for by law, could allow criminals to hide their assets and hide them in order to inject them into the financial system. In this regard, it is important to understand the structure of these entities both in terms of their ownership and control over their activities. As a result, the concept of beneficial ownership has been developed, which requires the identification of the last natural person exercising influence over the legal person. Filing beneficial ownership information is free in most economies.
However, some savings charge an administrative fee. In the Czech Republic, for example, an administrative fee of $47 is charged for legal entities registered in the commercial register. In France, the registration of beneficial owners takes place at the same time as the registration, for registration in the commercial register an additional fee of 21 US dollars is charged. In Luxembourg, the notary must pay a registration fee of USD 18 for the beneficial owner. In Sweden, it is mandatory to register beneficial ownership information online on the Bolagsverket website at a cost of $30. Measures to be taken in this context include public registration and access to basic information on legal entities, timely access to up-to-date beneficial ownership information and measures to prevent misuse of bearer shares and registered shareholders or directors. In addition, up-to-date information on legal regimes should also be made available to competent authorities in a timely manner. While the requirement for state authorities to register legal entities imposes country-specific obligations, the other requirements of the FATF Recommendations relate only to a desired outcome. Countries can therefore apply a tailor-made approach that best suits their legal system, provided that the objective of the recommendations is achieved. The objective of the FATF standards on transparency and beneficial ownership is to prevent the misuse of company vehicles for money laundering or terrorist financing. The guidelines include: In summary, beneficial ownership reporting increases transparency and supports the integrity of the financial sector and enforcement activities.
Making the recording of useful information simple and cost-effective can promote compliance. The introduction of streamlined procedures is therefore important for economies implementing new transparency strategies. This is true both at the national level (no jurisdiction has a fully functioning beneficial ownership system) and at the international level (due to the cross-border nature of financial crime). Of the 64 economies where reporting is mandatory, 19 economies do not set a deadline for submitting beneficial ownership information. Elsewhere, the delay varies from five days in Paraguay to one year in Argentina. The median time for disclosure of information is 30 days. In India, beneficial owners must notify their status within 30 days, and companies are responsible for reporting changes to the business register. Beneficial ownership registration was mandatory in 64 economies in 2020. This requirement is more common in high-income economies of the Organisation for Economic Co-operation and Development, where more than the majority of countries have adopted it. Only 20 per cent of East Asia and Pacific economies and 21 per cent of sub-Saharan African countries require companies to provide beneficial ownership information. In addition, less than 14% of low-income economies require disclosure, compared to 51% of high-income economies. This year, the FATF conducted a public consultation on possible amendments to R.24 on transparency and beneficial ownership of legal entities, the results of which are pending at the time of writing.
It is hoped that this process will lead to a better understanding of the causes of the current weakness of the current beneficial ownership environment and the absence of such a framework in far too many jurisdictions. There is now a broad consensus that beneficial ownership registers are necessary not only to combat money laundering, but also to combat tax evasion and other forms of financial crime, to facilitate the tracing and recovery of stolen assets and, in particular, for publicly accessible registers, for their deterrent effect. Beneficial ownership is defined as any natural person who ultimately owns or controls a legal entity or arrangement, such as a company on whose behalf a transaction or activity is conducted. The anonymity of these beneficiaries has allowed the concealment of significant questionable financial activities, and many governments are calling for more transparency on beneficial ownership is increasingly a global problem. As countries take steps to improve financial transparency, beneficial ownership disclosure will be as simple and cost-effective as possible, promoting compliance and helping to achieve the ultimate goal of greater corporate accountability. In recent years, the issues of beneficial ownership identification and improving financial transparency in general have become increasingly important worldwide. In April 2021, the U.S. Financial Crimes Enforcement Network (FinCEN) sought public input on the implementation of the provisions of the U.S. Corporate Transparency Act (CTA).
CTA requires certain start-ups and existing companies to identify and share beneficial ownership information with FinCEN. Other economies require separate applications directly in a particular registry. In Belgium, the Register of Final Beneficial Owners (UBO) for new companies was launched in October 2018, and existing companies had until the end of September 2019 to register their UBOs. Slovenia was one of the first countries to introduce a specific register and required all companies with more than one shareholder or director to declare beneficial owners. Newly created companies must register directly in the register of beneficial owners within eight days of their incorporation. For the private sector, the information contained in beneficial ownership registers is also essential for effective AML/CFT compliance processes. Financial institutions and DNFBPs themselves also suffer from dysfunctional or non-existent transparency of a jurisdiction`s beneficial owners: poor anti-money laundering compliance increases their exposure to legal, financial and reputational risks (fines). As evidence of these activities has emerged, many governments have tried to prevent the misuse of businesses for money laundering or other illegal activities.