The Financial Action Task Force (FATF) jointly with the Egmont Group of Financial Intelligence Units, published the report on “Concealment of Beneficial Ownership”
This report presents a global view of how legal persons and arrangements, and professional intermediaries can help criminals hide illicit assets.
First and foremost, the purpose of this Report is to assist national authorities, including financial intelligence units, financial institutions and other providers of professional services in understanding the nature of the risks they face in terms of understanding the beneficiary's property.
An important component of the Report has become generalized by experts indicators of concealment of the beneficiary ownership, in particular, indicators about the client, features of shell companies and suspicious transactions.
Along with this, the mentioned study accumulated the experience of law enforcement and other private sector experts, as well as open source research and intelligence reports on methods used by criminals to conceal criminal property.
The Report also highlights the importance of effectively implementing the FATF Beneficiary Ownership Recommendations to ensure that competent authorities have access to adequate, accurate and timely information on beneficiary ownership and control of legal entities, including, in particular, express trusts.
The report is based on the analysis of 106 case studies provided by 34 different jurisdictions that demonstrate that legal entities, mainly shell companies, are key in schemes developed to conceal a beneficiary's ownership.
In addition, example used by international experts on the effective work of Ukraine regarding the disclosure of criminal beneficiary ownership and the investigation of a fact of money laundering from corruption, embezzlement and misappropriation by former Ukrainian high officials should be extracted (page 166 of the Report).
The report also emphasizes the need for the widest access of financial intelligence units to information contained in government registers, primarily on beneficiary ownership issues.
The report also pays particular attention to the lack of awareness and education of reporting entities on ML/FT risk, which impedes the identification of red flags on money laundering and terrorist financing.
The report also highlights the world's best practices for effective state policy in the area of business registration, with examples from countries such as Spain and Italy that have notary-based registration systems, which impacted on the positive ratings of these countries during FATF evaluation.
As a result of analysis and consultations, the report provides countries with a number of proposals aimed at addressing the vulnerability of concealment of beneficial ownership, in particular, with the need to:
‐reviewing the role of nominee directors and shareholders, including measures that limit their abuse;
‐effective regulation of professional intermediaries in accordance with the FATF Standards, providing professionals with knowledge about ML and FT vulnerabilities to increase their awareness and help mitigate vulnerabilities associated with concealment of beneficial ownership;
‐further work on identifying possible solutions or measures to prevent abuse of a legal professional privilege to conceal information on beneficiary ownership, including through providing enhanced training and guidance to legal professionals;
‐ensuring that financial intelligence units have access to as wide list of financial information as possible;
‐increasing the relevant information exchange and records of operations to support global efforts to improve transparency of beneficial ownership;
‐further work on understanding what can be done to improve the quality and timeliness of cross-border information exchange, including through mutual legal assistance requests;
‐consideration and formulation of vulnerabilities and threats related to national and foreign legal persons and arrangements, national and foreign intermediaries involved in their establishment, and the means by which criminals can use them to facilitate money laundering or other criminal activity.
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