ACAMS report on Beneficial Ownership: Taking the Extra Step to Data Accuracy
Beneficial ownership transparency is a powerful tool for combating financial crime. By understanding who the real owners of businesses and other legal entities are, authorities can better detect and disrupt financial crime schemes.
The Financial Action Task Force (FATF) requires countries to establish beneficial ownership registries. In a recent report, "Beneficial Ownership of Legal Persons," the FATF requires governments to ensure that the beneficial ownership registries contain adequate, accurate and up-to-date information.
To help countries implement effective beneficial ownership transparency measures, ACAMS, a global professional association for anti-money laundering and financial crime specialists, has published a report titled "Beneficial Ownership: Taking the Extra Step to Data Accuracy."
How can countries ensure that the beneficial ownership registries contain accurate information?
The reality is that there is no one "right" approach to ensure that a registry has accurate beneficial ownership information.
The ACAMS report aims to provide a menu of options to policymakers and countries on implementing effective beneficial ownership transparency measures for legal persons, including companies, foundations, and other legal arrangements.
These options include:
Requiring complete and accurate beneficial ownership information submission for entity formation is a good start.
Third parties with anti-money laundering (AML) obligations can be engaged to collect and verify such information during the formation and registration process.
2.?Automated cross-checks with other government databases
These checks include comparing beneficial ownership information submitted to the registry with information in other government databases, such as the tax authority or the financial regulator.
This step can help to identify discrepancies and inconsistencies.
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3. Verification by independent third parties
Requiring beneficial owners to provide third-party verification of their ownership information, such as from a lawyer or accountant, is another good practice.
Although this is a reliable verification method, it can be more expensive and time-consuming for both the beneficial owners and the registry.
4.? ??Beneficial ownership registry internal controls
Authorities responsible for beneficial ownership registries should consider establishing risk-based internal controls to identify inaccurate and/or suspicious activity.
These controls may include automated cross-checks with other government databases, verification by independent third parties, and enhanced review of higher-risk entities.
5.?Leveraging financial institutions and designated non-financial businesses and professionals (DNFBPs)
Financial institutions and DNFBPs may be required to report beneficial ownership information to the registry on their customers. This can be an effective way to collect information on a large number of legal entities. Still, it is crucial to ensure that financial institutions and DNFBPs have adequate safeguards in place to protect the privacy of this information.
6.? ??Leveraging the public and civil society?
Making beneficial ownership information publicly accessible and engaging with the public and civil society can help identify and report suspicious activity. This can be an effective way to promote transparency and accountability, but it is important to ensure safeguards are in place to protect the privacy of beneficial owners.
The paper also has three structural enhancements to ensure more accurate beneficial ownership information. These include:
ACAMS's report provides valuable insights for policymakers and countries on implementing effective beneficial ownership transparency measures.
By implementing the tactical ways and structural enhancements identified in the report, countries can help combat money laundering and other financial crimes.