VII. General questions
20. What are the potential issues/challenges for the private sector regarding implementation of the R.25 requirements?
The lack of a central repository of information about trusts, the lack of a requirement to register information in such a repository (e.g. by making legal validity contingent on registration), and the lack of the verification of that information poses a challenge to the private sector.
21. Do you see any challenges in obtaining information regarding beneficial ownership information of legal arrangements when the trustee (or equivalent) resides in another jurisdiction or when the legal arrangement is administered abroad?
This scenario poses significant challenges, as evidenced by recent mutual evaluation reports. Therefore it is critical that trusts should be centrally registered in each jurisdiction to which it has a “sufficient link” (as detailed in responses to questions in Section I) and its information available to competent authorities. Making a trust’s legal validity in a jurisdiction contingent on its registration would address otherwise insurmountable challenges to compliance.
22. Are there any suggestions to improve R.25 and its Interpretive Note to better meet its stated objective to prevent the misuse of legal arrangements for money laundering or terrorist financing?
FATF has acknowledged that publicly available BO registers play a major part in increasing transparency and can help combat money laundering and financing of terrorism in its current and proposed guidance of Recommendation 24. This has been echoed by the EU for legal arrangements, which states the following in its fifth AML Directive:
[...] public access to beneficial ownership information would contribute to combating the misuse of trusts and similar legal arrangements, similar to the way public access can contribute to the prevention of the misuse of corporate and other legal entities for the purposes of money laundering and terrorist financing.
Public access to beneficial ownership information allows greater scrutiny of information by civil society, including by the press or civil society organisations, and contributes to preserving trust in the integrity of business transactions and of the financial system. It can contribute to combating the misuse of corporate and other legal entities and legal arrangements for the purposes of money laundering or terrorist financing, both by helping investigations and through reputational effects, given that anyone who could enter into transactions is aware of the identity of the beneficial owners. It also facilitates the timely and efficient availability of information for financial institutions as well as authorities, including authorities of third countries, involved in combating such offences. The access to that information would also help investigations on money laundering, associated predicate offences and terrorist financing.
FATF should consider a requirement to make the information publicly available, or at the very minimum, access for other data users who play a role in fighting financial crime, such as all non-AML-regulated businesses who engage with trusts, investigative journalists and civil society. Denmark has made all information relating to trusts available to the public, thereby also providing direct and timely access for FIs, DNFBPs, and overseas competent authorities.
23. What are the areas in particular where the private sector would benefit from guidance regarding implementation of R.25 requirements, including suggested revisions described above?
It should be fully clear what the obligations are for different parties to a trust and legal arrangement. This should include the types of information private sector actors can therefore reasonably expect certain parties to hold, and clarifying what obligations FIs and DNFBPs have with respect to trusts and legal arrangements under Recommendation 10 by harmonising guidance on what constitutes a beneficial owner for trusts and legal arrangements across the FATF Standard.