FATF Guidance on Beneficial Ownership
Response to the public consultation on the updated guidance on Recommendation 24 – December 2022
Open Ownership (OO) provides technical assistance to countries implementing beneficial ownership (BO) transparency reforms, to help generate accurate data on BO that complies with international standards and meets the needs of data users across government, obliged entities and the wider private sector, and civil society.
Since 2017, OO has worked with over 40 countries to advance implementation of beneficial ownership reforms, as well as supporting the creation of over 15 new central and sectoral registers. OO has developed the world’s leading data standard for BO information, co-founded the international Beneficial Ownership Leadership Group, and built the world’s first transnational public beneficial ownership register.
OO is pleased to contribute to the public consultation on the updated guidance of R24. In response to the Financial Action Task Force’s questions:
a) Whether the Guidance is clear or are there any issues which need further clarification.
OO commends the Financial Action Task Force on significant steps forward in clarifying basic concepts and aspects related to beneficial transparency. Nevertheless, several issues remain. OO has made in-line edits to the updated R24 guidance to address issues relating to lack of clarity, insufficient clarification, and omissions. Proposed amendments are marked in blue, with additions underlined and deletions struck out. In general, OO believes the guidance would benefit from a thorough copy-edit to ensure the language is simple, clear, and does not cause confusion. This is particularly because individuals from many jurisdictions will be using this guidance, the vast majority of which will not have English as their first language, and may also make use of automatic translation services.
In engagements with countries implementing reforms to comply with R24, OO has observed that the unclear phrasing of R24 has caused significant confusion not just with implementing agencies, but also with assessors of FATF-Style Regional Bodies. This highlights that this is not just an esoteric issue, but one that relates to the effectiveness of the FATF Standard itself.
b) Are there case examples of registries and alternative mechanisms for holding of accurate, adequate and up-to-date beneficial ownership information?
OO is unaware of any alternative mechanisms for holding accurate, adequate and up-to-date beneficial ownership information. OO has seen proposals for approaches not using registers managed by a company registrar, FIU or competent authority, but these in effect still amount to a registry approach.
OO has seen many case examples of registries holding accurate, adequate and up-to-date beneficial ownership information. The following is a list of countries including which aspects of implementation they demonstrate best practice in:
Austria, Denmark and Slovakia (Register of Public Sector Partners): ensuring accuracy through the verification of identity and status of beneficial owners
Austria: effective, proportionate and dissuasive sanctions
Denmark and United Kingdom: accessibility format, and access for users beyond government who contribute to achieving AML/CFT aims
Kenya and Nigeria: verification of identity of beneficial owners by cross-checking with other authoritative government registers
Armenia and Nigeria: collection and storing of data in a structured format, and use of unique identifiers
United States: Legal definition of beneficial ownership
c) Are there case examples of mechanisms to verify beneficial ownership information in low-risk scenarios?
Austria, Denmark, Kenya and Nigeria all include automated cross-checks with other authoritative government registers. As these checks are automated, they can be applied to all beneficial ownership declarations, irrespective of risk.
d) Are there case examples of the use of information held by stock exchanges for listed companies to meet beneficial ownership information obligations?
OO is unaware of any stock exchanges which meet the recommendations in the guidance on beneficial ownership for listed companies. Listed companies should provide:
- information about the stock exchanges on which the company has equity listed;
- identifying information for the listed equity securities;
- information about the listed company itself;
- confirmation on whether or not (1) makes the company eligible for exemptions from BO disclosure requirements.
The agency responsible for maintaining the BO register should have the capacity to:
- check and, if necessary, reject claims for exemptions based on the stock exchanges on which the company is listed;
- record the fact that an exemption has been granted on the basis that the declaring entity is a listed company on an exchange with adequate ownership disclosure requirements.
Proposed approaches by Australia in its current consultation paper on Multinational tax integrity are promising in this regard. The proposed approach includes expanding its substantial holding and tracing notices regime, including its enforcement regime; placing requirements on individuals to declare their beneficial ownership to listed companies; requiring public listed companies to maintain their own beneficial ownership registers; and collation of information from each entity’s register onto a public, central register.
For further information or to discuss these responses in further detail, please contact [email protected].