V. Approach in collecting beneficial ownership information
13. Can such an approach ensure that competent authorities have timely access to beneficial ownership information in the context of legal arrangements?
Countries implementing the registry approach as part of the multi-pronged approach for the beneficial ownership of legal entities under Recommendation 24 have demonstrated the best results in FATF mutual evaluation reviews in terms of making adequate, accurate and up-to-date information available to competent authorities. A similar approach should be taken for Recommendation 25.
14. Have you seen any issues/challenges with including information collected by other agents or service providers including trust and company service providers, investment advisors or managers, accountants, or lawyers as a mechanism?
Besides the potential conflict of interest for agents and service providers in providing accurate and up-to-date information about trusts to authorities, experience with Recommendation 24 shows that relying solely on the provision of information by these intermediaries provides unnecessary barriers to timely access, risks tipping off the subjects of investigation, limits proactive investigations and bulk analysis by competent authorities, and provides challenges with ensuring compliance.
15. Do you think that a multi-pronged approach should be followed for accessing beneficial ownership information of legal arrangements, consistent with Recommendation 24? Or would the features of legal arrangements make a single-pronged approach preferable instead? What are the pros and cons, including in relation to administrative burden, from these approaches?
OO would be in favour of a multi-pronged approach for legal arrangements, consistent with Recommendation 24. Lessons from Recommendation 24 show that in order to make it most effective, a central registry approach should be required. In order to incentivise compliance, registration should have constitutive effect. This means that a trust would not be legally valid in a country where it has not been centrally registered. This approach has already been taken by some countries, such as South Africa, where trusts must be registered in order to be valid. Certain domestic trusts must be registered with the Master of the High Court, who subsequently issues letters of authority to the nominated trustee(s). No trustee may act as such without the written authority of the Master, thereby giving it legal validity upon registration. To further encourage compliance, Recommendation 25 could require new (classes of) beneficiaries to not be able to benefit from the trust property if their information has not been updated with the central register.
16. Are there any other mechanisms that FATF should consider as a reliable source of beneficial ownership information for competent authorities?
Emulating Recommendation 24, competent authorities should rely on information held by trustees, who should be legally required to hold up-to-date and accurate information on the trust and its parties; information from a central register, where all relevant trusts should be registered to have legal validity; supplementary sources of information such as asset registries, information collected by other competent authorities, and information collected by other agents or service providers including trust and company service providers, investment advisors or managers, accountants, or lawyers. A failure to meet obligations should be met with proportionate and dissuasive sanctions.
Relevant trusts should be all trusts that have a sufficient link with the country as detailed in the answer to questions in Section I.