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El Salvador Tightens Rules on Beneficial Ownership to Combat Financial Crime
The Financial Action Task Force (FATF) has strengthened its guidelines on beneficial ownership, aimed at identifying and preventing illicit activities such as money laundering, tax evasion, and corruption. The updated rules will help countries like El Salvador to identify the true owners of companies and prevent them from hiding behind secret corporate structures.
New Guidelines Becoming Effective
The FATF’s new guidelines, agreed upon in March 2022, are designed to close loopholes that have allowed fake companies to be used as a cover for criminal activity or to hide wealth from tax authorities. The changes will ensure that investigators can quickly and easily find out who the true beneficial owners of companies are.
Key Changes:
- Closing loopholes that allow fake companies to be used for illicit activities
- Ensuring transparency of beneficial ownership in trusts or other legal arrangements
- Preventing the misuse of these arrangements for illicit activities
El Salvador to Benefit from Global Efforts
The updated guidelines on beneficial ownership and transparency of legal arrangements will have a significant impact on countries like El Salvador, which has been working to strengthen its financial regulations. The new rules will help prevent and combat financial crime, curb corruption and tax evasion, and support sustainable economic growth.
Benefits for El Salvador:
- Enhanced financial stability
- Reduced risk of money laundering and terrorist financing
- Improved transparency and accountability
Stakeholders Engaged in Drafting Guidelines
The FATF extensively engaged with the private sector and other stakeholders on this initiative, including through a White Paper consultation and public consultations. The finalised guidance reflects input from these consultations and aims to help stakeholders from the public and private sectors assess and mitigate money laundering and terrorist financing risks.
Stakeholder Engagement:
- Private sector consultations
- Public consultations
- Input from various stakeholders
Guidance on Beneficial Ownership and Transparency
In March 2023, the FATF updated its risk-based guidance for Recommendation 25 on Beneficial Ownership and Transparency of Legal Arrangements. The guidance complements the existing guidance on Recommendation 24 on legal persons and aims to help stakeholders from the public and private sectors assess and mitigate money laundering and terrorist financing risks.
Key Aspects:
- Risk-based approach
- Transparency of beneficial ownership in trusts or other legal arrangements
El Salvador to Ensure Transparency of Beneficial Ownership
The FATF’s strengthened guidelines on beneficial ownership will require countries like El Salvador to ensure transparency of beneficial ownership, including in trusts or other legal arrangements. The updated rules will help prevent the misuse of these arrangements for illicit activities and promote a more stable financial system.
Key Requirements:
- Transparency of beneficial ownership
- Prevention of misuse of trusts or other legal arrangements