A Guide to Anti-Money Laundering for Crypto Firms
Moves by the Financial Action Task Force (FATF) to prevent the concealment of company information have been frustrated by a lack of effective action from countries across the globe, the body has said.
In a statement responding to the release of the Pandora Papers earlier this month, FATF argued that although it introduced global standards as far back as 2003, these have not been implemented by the majority of countries.
While over 200 nations have committed to their financial institutions – and bodies such as lawyers, accountants, and real estate agents – identifying and verifying beneficial ownership information on companies in their jurisdiction, many are still not putting this into practice.
“Out of more than 100 mutual evaluations, only one-third of countries have laws and regulations related to the transparency of legal persons and arrangements that comply with FATF standards. Just 10% are taking effective measures to ensure the transparency of company and trust ownership,” the statement says.
The Pandora Papers – a collection of more than 11.9 million confidential files, exposing the secret wealth and offshore dealings of the rich and powerful – added new urgency to the ongoing global debate around beneficial ownership standards. One prominent case covered in the papers concerned the Thai-based indicted antique collector Douglas Latchford, and how artifacts linked to him ended up in Australian galleries.
Consultation on Changes to Recommendation 24
“Recognizing the urgent need to take further action to combat the misuse of shell and front companies by illicit actors” the FATF has been leading work to update international requirements on beneficial ownership transparency.
It has just published proposals for amending Recommendation 24 – designed to increase transparency around the beneficial ownership of legal persons – following consultations this summer.
The proposed amendments include strengthening the language used in the Recommendation while compelling all countries to take additional measures to mitigate the risks. For example, language in the existing Recommendation stating: “Countries should take measures to prevent the misuse of legal persons for money laundering or terrorist financing,” would change to “Countries should assess the risks of misuse of legal persons for money laundering or terrorist financing, and take measures to prevent their misuse.”
Changes also include prohibiting the issue of bearer shares – a type of share that doesn’t need to be registered under a specific person or business and bestows full ownership rights on whoever holds it. Many countries in Asia-Pacific – including Hong Kong, Singapore, and Australia – already have restrictions against, or don’t allow, the issue of bearer shares, and others are tightening up their measures against the practice.
The amendments will require countries to establish a beneficial ownership registry or use an alternative system that also “enables efficient access to beneficial ownership information by competent authorities”. Feedback on the changes should be received by 3 December 2021.
Wider Focus on Strengthening AML Measures
At its previous Plenary in June, FATF issued reports on technological innovation, virtual assets, and environmental crime, arguing that countries must not let the pandemic slow progress on the implementation of risk-based standards.
In recent months, a host of countries in Asia-Pacific have introduced reforms. New Zealand has invited feedback on changes to its AML/CFT Act, Singapore announced an information-sharing platform to fight money laundering, the Philippines’ AMLC backed beneficial ownership transparency, and Australian banks and fintechs supported the closure of major loopholes in the country’s anti-money laundering legislation.
In June G7 countries, including Japan, acknowledged the abuse of company structures by criminals and pointed to the effectiveness of beneficial registries as a tool to tackle it. They also agreed to implement and strengthen their own national registries of company beneficial ownership information.
To learn more about the state of compliance in 2021 across regulatory change, sanctions, and crypto, sign-up for our next webinar. The webinar is free, and you’ll hear from global experts at Stripe, Railsbank, and the Royal United Services Institute (RUSI).
Originally published November 22, 2021, updated December 16, 2021
Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.
Copyright © 2022 IVXS UK Limited (trading as ComplyAdvantage).