Best Practices on Beneficial Ownership for Legal Persons

Anonymous shell companies are one of the most widely used methods for laundering the proceeds of crime and corruption.  New FATF Best Practices help countries get rid of the cloak of secrecy concerning the ultimate owner of a company, foundation, association or any other legal person, and prevent their misuse for crime and terrorism.

The Financial Action Task Force (FATF) is the global standard-setter for measures to fight money laundering and terrorist financing.  In 2003, the FATF became the first international body to set global standards on beneficial ownership. It required countries to ensure that their authorities could obtain up-to-date and accurate information about the person(s) behind companies and foundations and other legal persons.  The FATF further strengthened and clarified its beneficial ownership requirements in 2012.

Nevertheless, the assessments of countries actions’ in this area since then show that many countries still find it challenging to ensure transparency of ownership of legal persons. Many are not able to effectively prevent criminals and terrorists from hiding their identity and illegal activities behind the façade of seemingly legitimate activity.

The FATF has finalised best practices with examples from across the global network of FATF and FATF-Style regional bodies' members, which will help countries implement the FATF’s requirements.  The report highlights that jurisdictions using a multi-pronged approach with several sources of information are often more effective in preventing the misuse of legal persons for criminal purposes. 

The report identifies the most common challenges that countries face in ensuring that the beneficial owner(s) of legal persons is identified, and suggests key features of an effective system.

The paper also suggests options for jurisdictions to obtain beneficial ownership information of overseas entities.