Caribbean AML | CFT Intelligence AML Digest | July / August 2018
Transparency and Beneficial Ownership ” which states in part “ The availability of beneficial ownership information assists competent authorities by identifying those natural persons who may be responsible for the underlying activity of concern or who have information to further the investigation . This makes corporate vehicles less attractive for criminals .”
Beneficial Owner defined
A beneficial owner is defined as “ Beneficial owner refers to the natural person ( s ) who ultimately owns or controls a customer and / or the natural person on whose behalf a transaction is being conducted . It also includes those persons who exercise ultimate effective control over a legal person or arrangement .”
There are three issues which are essential to the establishment of an effective beneficial ownership regime ; ownership , control and transparency .
Ownership
The FATF guidelines recommend that in respect of corporate vehicles , share ownership thresholds should be established . They do not stipulate what it should be but suggest 25 % as reasonable . Most countries in Europe and the US have established a minimum threshold of 25 %. Barbados has adopted an even more stringent approach ; The AML / CFT guideline issued by the Central Bank of Barbados ( Dec 2016 ) state “ If the company is a private , identity should be sought on persons with a minimum of 10 % shareholding ”.
It is important to note that financial institutions are required to utilise lower thresholds depending on the perceived quantum of risk being presented .
Control strings may have no identifiable share ownership at all .
There may be informal control through other means such as personal connections to persons that possess ownership or the natural person ( s ) responsible for strategic decisions that fundamentally affect the business practices or general direction of the legal person . The permutations by which the actors behind the veil may exercise control are multiple and that is why the issue of beneficial ownership is such a difficult issue for financial institutions who wish nothing more than to be able to book the business . It is the reason financial institutions place such a great emphasis on Know Your Customer ( KYC ) protocols .
Transparency The third leg of the beneficial ownership regime is the issue of who should have access to beneficial ownership information and where that information should be held . FATF wants a virtual open door policy but provides some flexibility on how beneficial ownership information is made available . FATF preference is for the maintenance of central beneficial ownership registers that are open to those who need the information and it is easy to see why this would be the most efficient and transparent solution .
Beneficial ownership regulations have both an ownership prong and a control prong . Control may include indirect control which may extend beyond legal ( direct ) ownership and may include devices such as shareholder ' s agreements , and the exercise of dominant influence or power to appoint senior management . There may be collusion between shareholders to increase the level of control by a person through formal or informal agreements . The person pulling the
There has been considerable pushback however ; objections revolve around loss of confidentiality and
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