Firms will be aware that the key requirement in applying customer due diligence measures (CDD) for the prevention of money laundering (and, of course, combating terrorist financing) purposes is the identification and verification of the customer and, where applicable, of the beneficial owners.
The beneficial owner is the person(s) who ultimately owns or controls a customer. In terms of individuals this is, normally, straightforward with the customer being the beneficial owner. However, as we all know, it becomes more complex when faced with e.g. corporate entities, trusts etc. To this end the Joint Money Laundering Steering Group already produces useful guidance to firms to assist in the application of CDD, including identification of the beneficial owner(s).
The Financial Action Task Force (FATF) has recently published its own guidance on ‘Transparency and Beneficial Ownership’ which, amongst other topics, includes the misuse of legal persons and arrangements and, of course, beneficial ownership.
The guidance is really aimed at national authorities and policy makers but those having responsibility for AML oversight will no doubt wish to add this to their archive of reference material.
Whilst on the subject of beneficial ownership, a reminder that the current version of the Money Laundering Directive (fourth) – which is still at the European negotiation stage – includes a requirement (Chapter III) for Member States to ensure that corporate and ‘other legal entities’ hold information on their beneficial ownership. Such information must be made available to any entity applying CDD in accordance with general AML requirements. In addition the information must be held in a manner which allows access by competent authorities and Financial Intelligence Units (in the case of the UK this would be the National Crime Agency) without alerting the entity concerned. Similar requirements will apply to trustees in terms of identity of the settlor and beneficiaries.