FATF tightens beneficial ownership standards

Finance departments may soon see tougher customer due diligence and ownership disclosure rules after a government watchdog tightened beneficial ownership standards earlier this month.

The Financial Action Task Force (FATF), a global intergovernmental organization that sets anti-money laundering and counter-terrorist funding standards for over 200 jurisdictions, released new rules requiring that “competent authorities have adequate, accurate, and up-to-date information” on a company’s real owners in a bid to thwart organized crime and sanctions evaders from using shell companies to hide illicit financial flows.

The FATF recommends that countries create a national publicly accessible company registry that includes the company name, a list of directors, basic regulating powers, and company addresses to help authorities identify a company’s true owners. Shell companies and opaque ownership structures enable corruption, money laundering, and terrorist financing, according to the FATF.

US companies will have to register their beneficial ownership with the Financial Crimes Enforcement Network (FINCEN) starting in January 2024, as part of the Corporate Transparency Act passed in 2020, but as of now, that registry is not intended to be public.

For companies like financial institutions and investment firms that are required to verify and report customer identities, the new FATF standards also recommend that companies expand their efforts to include verifying the “basis of identification.”

That would include asking for official government identification documentation, or confirming identity through national registries such as passport databases, or tax registers.

FATF recommendations are intended to provide anti-money laundering and counter-terrorism financing frameworks for member jurisdictions.—DA