FATF ¦ R.25 Trans­par­en­cy and Be­ne­fi­cial Own­er­ship of Le­gal Ar­range­ments

Recommendation 25: Strengthening Transparency and Beneficial Ownership of Legal Arrangements

Recommendation 25 addresses a central vulnerability in the fight against money laundering, terrorist financing and proliferation financing: the opacity of trusts and similar legal arrangements. These vehicles can mask the true human actors behind assets and transactions, enabling criminals and illicit actors to hide proceeds, launder funds or shield assets from scrutiny. The Recommendation requires countries to identify the risks and to ensure that accurate, up-to-date information on express trusts and equivalent arrangements is available to competent authorities in a timely and efficient way.

Scope of the requirement

At its core, Recommendation 25 asks states to require trustees and persons in equivalent roles to obtain and hold basic and beneficial ownership information about the legal arrangements they administer or oversee. This includes identity details for settlors, trustees, protectors (where applicable), beneficiaries (or classes of beneficiaries), and any natural persons who exercise ultimate effective control. Where parties to the arrangement are legal persons or other arrangements, trustees must also obtain and hold ownership information about those entities. Trustees should also record information about other regulated agents and service providers involved with the arrangement, such as investment advisers, accountants and tax advisors.

Transparency measures and public information

Countries that have express trusts and similar arrangements under their law should map and document the different types and forms of these structures, explain how they are set up, and describe how basic and beneficial ownership information is collected. That mapping and description should be publicly available to promote legal clarity and to guide regulated entities and supervisors.

Risk assessment and mitigation

States must assess money laundering and terrorist financing risks associated with different types of trusts and similar arrangements, focusing both on those governed by domestic law and those administered or managed within their jurisdiction. The assessment should also consider foreign arrangements that have sufficient links to the jurisdiction — examples of sufficient links include significant local investments, tax residency, or ongoing business relationships with domestic financial institutions or designated non-financial businesses and professions (DNFBPs). Based on identified risks, countries should take proportionate steps to mitigate and manage vulnerabilities.

Bastian Schwind-Wagner_Follow

"Recommendation 25 reinforces the need for clear, reliable information on the human actors behind trusts and similar arrangements so that illicit use can be detected and disrupted. Requiring trustees to collect, verify and retain beneficial ownership data creates practical pathways for authorities and regulated entities to assess and respond to money laundering and terrorist financing risks.

Effective implementation must be risk‑based and proportional, recognising different trust types and domestic legal traditions. Combining public registries, supervisory coordination and enforceable sanctions will maximise transparency while limiting unnecessary burdens on legitimate fiduciary activity."

Disclosure obligations and cooperation with regulated sectors

Trustees and equivalents must disclose their status to financial institutions and DNFBPs when they form a business relationship or conduct occasional transactions above relevant thresholds. They must be able to cooperate with competent authorities and not be prevented by law from providing necessary information about the trust or arrangement. Similarly, trustees should not be prevented from furnishing financial institutions and DNFBPs, upon legitimate request, with information on beneficial ownership and assets related to the trust in the context of a business relationship.

Sources for obtaining ownership information

To ensure competent authorities can efficiently obtain the required information without having to rely solely on trustees, the Recommendation encourages using multiple information sources, including:

• public authorities or bodies that hold beneficial ownership information (for example central registries of trusts or asset registries);
• other competent authorities, such as tax administrations, which may collect relevant asset and income information; and
• regulated private actors, including trust and company service providers, investment managers, accountants, lawyers and financial institutions.

Quality, verification and retention of information

Countries should ensure mechanisms exist so that information on trusts and similar arrangements is adequate, accurate and up-to-date.

Adequate information must be sufficient to identify the natural persons who are beneficial owners and to define their roles in the arrangement.

Accurate information must be verified using reliable documents, data or other information with a verification intensity adjusted according to risk.

Up-to-date information must be refreshed within a reasonable period following any change.

Trustees and equivalents should retain these records for at least five years after their involvement with the arrangement ceases; authorities are encouraged to apply similar retention requirements to other holders of relevant information.

Access by competent authorities and international cooperation

Law enforcement, financial intelligence units and other competent authorities must have powers to obtain timely access to basic and beneficial ownership information, the residence of trustees, and any assets held or managed by financial institutions or DNFBPs in relation to the trusts and equivalents. Countries should facilitate rapid, constructive and effective international cooperation for exchanging beneficial ownership information, including enabling domestic authorities to respond to foreign requests, and not placing undue restrictions on information exchange on grounds such as bank secrecy or fiscal matters. Where feasible, jurisdictions should designate and publicize the agency responsible for responding to requests for beneficial ownership information.

Liability and sanctions

Recommendation 25 requires clear responsibilities and legal consequences for non‑compliance. Trustees and persons in equivalent positions should be legally liable for failures to maintain, provide or update required information or should face effective, proportionate and dissuasive sanctions — criminal, civil or administrative — for such failures. Equally, sanctions should apply for obstructing timely access by competent authorities.

Practical considerations for implementation

Effective implementation requires proportional, risk-based measures. Not all trusts present the same level of risk: charitable trusts and statutory non‑charitable trusts with no ascertainable beneficiaries at set-up may reasonably be treated differently, with full identification of individual beneficiaries required only when they become entitled or exercise vested rights. States may use a mix of public registries, cooperative arrangements with tax authorities or sectoral information hubs to ensure accessibility and timeliness of data. Where legal traditions do not formally recognise trusts, the Recommendation’s obligations can be fulfilled through existing legal duties, common law obligations or administrative requirements.

Conclusion

Recommendation 25 closes a critical gap by making transparency of trusts and similar arrangements a global standard. By requiring trustees to collect and maintain detailed beneficial ownership information, by promoting multiple information sources, and by ensuring competent authorities and cross‑border partners have timely access, the Recommendation reduces opportunities for misuse. For policymakers, the task is to design proportionate, risk‑based systems — covering data collection, verification, retention, access and sanctions — that fit domestic legal frameworks while meeting the FATF standard’s core goal: exposing the natural persons who ultimately control assets and activity so that illicit financial flows can be detected, investigated and disrupted.

Dive deeper

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