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FATF Guidelines: Control and Beneficial Ownership of Legal Persons and Arrangements

In an effort to combat money laundering and terrorist financing, the Financial Action Task Force (FATF) has issued guidelines on controlling and beneficial ownership of legal persons and arrangements. These guidelines aim to ensure that financial institutions and designated non-financial businesses and professions (DNFBPs) have access to accurate and timely information on the beneficial owners and controllers of legal persons and arrangements.

Definition of Beneficial Owner

The FATF defines a beneficial owner as the natural person who ultimately owns or controls a legal person, including those individuals who exercise ultimate effective control over it. This definition extends beyond legal ownership and control, focusing on the actual persons who own and benefit from the assets of a legal person, rather than just those legally entitled to do so.

Control and Beneficial Ownership

In the context of legal persons, control refers to the ability to take relevant decisions within the entity and impose resolutions. This can be achieved through various means, including owning a controlling block of shares. However, ultimate control is exercised by the natural person or persons who actually own and benefit from the assets of the legal person.

Beneficial Ownership in Legal Arrangements

The FATF definition also applies to legal arrangements, such as trusts. In these cases, beneficial ownership is determined by identifying the natural person(s) at the end of the chain who ultimately owns or controls the arrangement. This may involve considering the settlor, trustee, and beneficiaries of a trust, as well as any clauses in the trust deed that impact ultimate control over the trust assets.

Guidance on Transparency and Beneficial Ownership

To ensure effective implementation of Recommendations 24 and 25, countries are advised to take measures to prevent the misuse of legal persons and arrangements for money laundering or terrorist financing. This includes ensuring adequate, accurate, and timely information on beneficial ownership and control is available to competent authorities.

Effective Mechanisms to Combat Misuse

The FATF guidelines emphasize the importance of implementing effective mechanisms to combat the misuse of legal persons and arrangements. This includes measures to prevent the issuance of bearer shares or bearer share warrants, as well as ensuring that nominee shareholders and directors are not used for money laundering or terrorist financing purposes.

Conclusion

In conclusion, the FATF guidelines on control and beneficial ownership of legal persons and arrangements aim to ensure transparency and accountability in financial transactions. By identifying the natural persons who ultimately own and benefit from assets, countries can better combat money laundering and terrorist financing, while promoting a safer and more secure financial system.