Curated by Isabella Fontana

A year after approving amendments to Recommendation (R.24) on beneficial ownership of legal entities, a highly controversial and divisive topic within the G20 and multilateral frameworks, the FATF issued new guidance in 2023. The document replaces the previous one, which referred to the 2012 AML standards, which underpin the current European directives, currently under review (AML Directive VI).

As in previous negotiations, the compromise on the reformulated recommendation on the BO (beneficial owner) was reached after long discussions, which saw the European countries, including the UK, very united, together with representatives of the European Commission, in supporting the importance of registers of data on legal entities, including data on the beneficial owner of companies.

The new standard on legal entities, in fact, contains a more explicit reference to registers than previously; however, it does not mandate their use. The importance of disclosing the true owners of controlling shares in companies is central to all anti-money laundering prevention processes. Corporate vehicles are a widely used tool for concealing the origin and/or destination or ultimate purpose of funds, thus polluting the financial system.

In general, the lack of adequate, accurate and up-to-date information on the beneficial owners of corporate vehicles facilitates money laundering and terrorist financing activities by creating a filter that masks:

• the identity of known or suspected criminals
• the true purpose of an account or property held by a corporate vehicle
• the origin or use of funds or property associated with a corporate vehicle.

Increasing the level of transparency of legal entities means making them less attractive to criminal infiltration. Legal entities themselves, financial institutions, and non-financial businesses and professions also play an important role in contributing to the ever-increasing reliability of the data provided to gate keepers of the prevention system.

This information contributes to the implementation of customer due diligence obligations and the identification and mitigation of money laundering and terrorist financing risks.  

The new guidance provides guidance for governments and the private sector to update their data discovery and reporting practices, also with a view to the new Round V country assessment cycle, which will begin in 2025.