FATF ¦ R.24 Trans­par­en­cy and Be­ne­fi­cial Own­er­ship of Le­gal Per­sons

Recommendation 24: Strengthening Transparency and Beneficial Ownership of Legal Persons

Recommendation 24 requires countries to identify and mitigate the risks that legal persons — primarily companies but also foundations, partnerships and other legal entities — can be misused for money laundering and terrorist financing. The Recommendation mandates that competent authorities be able to obtain timely, adequate, accurate and up-to-date information on the beneficial ownership and control of legal persons that are created domestically or that pose material risks and have sufficient links with the country. States may choose the architecture for collecting and making that information available (a centralized beneficial ownership register, company registry with enhanced data, or a combination of mechanisms), but they must meet the minimum standards set out in the interpretive note.

Basic information requirements and company registries

To identify beneficial owners, authorities first need reliable basic corporate information. At a minimum this includes the company’s name, proof of incorporation, legal form and status, registered office address, constitutional documents (for example memorandum and articles), a list of directors and unique identifiers such as tax identification numbers. Companies must also keep a register of shareholders or members showing names, shareholdings and categories of shares including voting rights. All companies formed in a jurisdiction should be registered in a company registry, which should record the basic information above and facilitate access by competent authorities, financial institutions and DNFBPs. Where the company or a public body already holds beneficial ownership information domestically, a shareholder register may be located abroad provided the company can promptly provide the required information on request.

Multi-pronged approach to beneficial ownership information

Countries should adopt a combination of mechanisms so that beneficial ownership can be determined quickly. Those mechanisms include:

• requiring companies to obtain and keep adequate, accurate and current beneficial ownership information and to cooperate fully with competent authorities;
• maintaining beneficial ownership information in a public authority or body (for example a company registry, tax authority, FIU or a dedicated BO registry); or
• implementing alternative mechanisms that give timely, efficient access to accurate beneficial ownership data.

Supplementary sources — such as regulator and stock exchange records, and BO information collected by reporting entities under Recommendations 10 and 22 — should be used where necessary. All parties that hold relevant information, including companies, intermediaries and liquidators, must retain records for at least five years after the company ceases to exist or ceases to be a customer.

Standards for adequacy, accuracy and timeliness

“Adequate” information is sufficient to identify the natural person(s) who ultimately own or control the legal person and the means by which control is exercised.

“Accurate” means the information has been verified using reliable, independently sourced documents, data or information; the degree of verification can be risk-based.

“Up-to-date” means the information is current and updated within a reasonable period after any change (for example within one month).

Competent authorities, especially law enforcement and FIUs, should have the powers needed to obtain rapid access to both basic and beneficial ownership information held by domestic public bodies, regulated entities and reporting entities. Company registries should facilitate timely access to public basic information for financial institutions, DNFBPs and foreign competent authorities, and jurisdictions should consider allowing them access to beneficial ownership details where appropriate.

Bastian Schwind-Wagner_Follow

"Countries must ensure timely access to accurate beneficial ownership information so competent authorities can identify the natural persons who ultimately own or control legal persons. Effective implementation requires clear legal duties for companies, accessible registries or equivalent mechanisms, and tailored measures to address bearer instruments and nominee arrangements.

Financial institutions and DNFBPs should use available public registries and their own customer due diligence processes to verify beneficial ownership, escalating unresolved discrepancies to authorities. International cooperation and proportionate sanctions complete the framework, deterring misuse and improving the integrity of the financial system."

Preventing misuse: bearer instruments and nominees

To reduce anonymity risks, countries must prohibit issuance of new bearer shares and bearer share warrants and apply measures to prevent misuse of any existing bearer instruments. Options for existing bearer instruments include converting them to registered form, immobilising them with regulated intermediaries who can provide timely access to competent authorities, and requiring holders to notify the company and for the company to record identity before any rights can be exercised.

Nominee shareholders and directors pose similar risks and should be managed. Measures could include requiring nominees to disclose their status and the identity of the nominator to the company and relevant registry (with nomineestatus recorded in public information), licensing nominees and requiring them to keep and make available the identity of the natural person on whose behalf they act, or prohibiting nominee shareholders or directors. Where nominees are already licensed as regulated entities subject to AML/CFT obligations, separate licensing might not be necessary but transparency and oversight remain essential.

Applying requirements to other legal persons

Recommendation 24’s principles extend beyond companies. Foundations, Anstalt, waqf (except in countries where waqf are legal arrangements under R.25) and limited liability partnerships should be subject to similar transparency measures adapted to their form and risk profile. For other types of legal persons, jurisdictions must assess ML/TF risk and ensure basic information is recorded, accurate and accessible so beneficial ownership can be established in a timely way.

Liability, sanctions and record retention

There must be clear responsibility for compliance, with effective, proportionate and dissuasive sanctions for legal or natural persons that fail to meet transparency and information requirements. Records relevant to beneficial ownership must be kept for at least five years after the entity ceases to exist or after the reporting relationship ends.

International cooperation and information exchange

Effective international cooperation is essential. States should rapidly and constructively provide wide-ranging mutual assistance with basic and beneficial ownership information, including facilitating access to company registry data, exchanging shareholder information, and using domestic powers to obtain BO information on behalf of foreign counterparts. Jurisdictions must not impose unduly restrictive conditions — such as invoking tax secrecy or banking secrecy — to frustrate legitimate requests and should monitor the quality and timeliness of mutual assistance. Agencies responsible for responding to BO information requests should be designated and made publicly known.

Practical implications for financial institutions and DNFBPs

Financial institutions and DNFBPs benefit when jurisdictions make BO information accessible because it supports customer due diligence under Recommendation 10 and ongoing monitoring. Where public access to BO registers is limited, regulated entities will still be required to collect and verify beneficial ownership information under their AML/CFT obligations. Regulators and supervisors should ensure that reporting entities have the powers and data they need to meet those obligations and that they escalate unresolved inconsistencies or suspicions to the authorities.

Conclusion

Recommendation 24 sets a clear standard: jurisdictions must create an environment in which competent authorities can promptly identify the natural persons who ultimately own and control legal persons. Achieving that requires robust basic company data, verified and current beneficial ownership information held in accessible registries or alternative mechanisms, specific measures to neutralise bearer instruments and nominee arrangements, tailored rules for other legal entities, enforceable sanctions, and active international cooperation. Implemented effectively, these measures significantly reduce the opportunities for misuse of legal persons for money laundering, terrorist financing and related crimes.

Dive deeper

• FATF ¦ The FATF Recommendations ¦ Link
• FATF ¦ Luxembourg’s measures to combat money laundering and terrorist financing ¦ Link