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FATF Adopts More Stringent Beneficial Ownership Standards

AML Compliance Knowledge & Training

One of the key announcements from the Financial Action Task Force’s March Plenary was its confirmation of changes to Recommendation 24 and its Interpretive Note relating to beneficial ownership standards.

The new standards require countries to ensure that competent authorities have access to adequate, accurate and up-to-date information on the true owners of companies.

Crucially, the amendment means the FATF is now explicitly requiring a “multi-pronged approach,” with beneficial ownership information collected via multiple means. Countries should now ensure beneficial ownership information is held by a public authority or body functioning as a beneficial ownership registry, or an alternative mechanism as efficient. 

They must also ensure that competent authorities can rapidly and efficiently access beneficial ownership information, and be able to assess and mitigate ML/FT risks associated with foreign companies, to which their countries are exposed. 

The FATF noted that its Mutual Evaluations have highlighted a string of poor practices related to beneficial ownership, saying the changes “respond to the significant misuse of legal persons for money laundering, terrorist financing, and also for proliferation financing in a number of jurisdictions.” 

Several countries have tightened their beneficial ownership standards in recent years, anticipating a greater focus on the issue from standard setters. In September 2021, the Philippines’ Anti-Money Laundering Council (AMLC) issued guidance to banks and financial institutions to include the identities of beneficial owners or account holders in their suspicious transaction reports in a bid to increase transparency.

In November, the Corporate Registers (Miscellaneous Amendments) Bill was tabled in Singapore’s parliament. The amendments are intended to reduce the risk of corporate entities being used for illicit purposes. Foreign companies are also required to update their register of members within a 30 day timeframe. 

However, the issue of beneficial ownership remains a challenge in some jurisdictions. In April 2021, Australia scrapped plans to introduce a Beneficial Ownership Register.

The FATF has said it will “analyze the growing practical experience of implementing beneficial ownership registries” to help countries identify best practices they can apply via their own regulators. 

Singapore Takes Over FATF Presidency

The FATF also announced that its new President for 2022-24 will be a representative from Singapore, the first time the country has held this significant post at the international money laundering and terrorist financing (ML/TF) watchdog. 

T Raja Kumar will commence his role on July 1st.  Mr. Raja is currently a senior advisor at Singapore’s Ministry of Home Affairs and head of Singapore’s FATF delegation. 

Welcoming the news, Singapore’s Minister for Home Affairs and Law, Mr. K Shanmugam, said: “Congratulations to Raja for being the first Singaporean to lead the FATF. Raja’s capabilities, international experience, and work as a senior public sector leader, operating in a multi-ethnic and multi-cultural environment across a range of disciplines, will come in useful to lead an international organization such as the FATF.

Mr. Raja has helped lead Singapore’s AML/CFT efforts, serving as Co-chairman of the National Interagency Committee on AML/CFT since January 2015, and has driven Singapore’s efforts to meet FATF Standards. He co-led Singapore’s FATF 4th round Mutual Evaluation in 2015.

The  Presidency helps to set FATF’s wider direction of travel, though the priorities for Raja’s presidency have not yet been announced. 

Originally published March 11, 2022, updated March 11, 2022

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