I. INTRODUCTION
1. Corporate vehicles1—such as companies, trusts, foundations, partnerships, and other types of legal persons and arrangements—conduct a wide variety of commercial and entrepreneurial activities. However, despite the essential and legitimate role that corporate vehicles play in the global economy, under certain conditions, they have been misused for illicit purposes, including money laundering (ML), bribery and corruption, insider dealings, tax fraud, terrorist financing (TF), and other illegal activities. This is because, for criminals trying to circumvent anti-money laundering (AML) and counter-terrorist financing (CFT) measures, corporate vehicles are an attractive way to disguise and convert the proceeds of crime before introducing them into the financial system.
2. The misuse of corporate vehicles could be significantly reduced if information regarding both the legal owner and the beneficial owner, the source of the corporate vehicle’s assets, and its activities were readily available to the authorities. 2 Legal and beneficial ownership information can assist law enforcement and other competent authorities by identifying those natural persons who may be responsible for the underlying activity of concern, or who may have relevant information to further an investigation. This allows the authorities to “follow the money” in financial investigations involving suspect accounts/assets held by corporate vehicles. In particular, beneficial ownership information3 can also help locate a given person’s assets within a jurisdiction. However, countries face significant challenges when implementing measures to ensure the timely availability of accurate beneficial owner information. This is particularly challenging when it involves legal persons and legal arrangements spread across multiple jurisdictions.
3. The Financial Action Task Force (FATF) has established standards on transparency, so as to deter and prevent the misuse of corporate vehicles. The FATF Recommendations require countries4 to ensure that adequate, accurate and timely information on the beneficial ownership of corporate vehicles is available and can be accessed by the competent authorities in a timely fashion. To the extent that such information is made available, 5 it may help financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs) to implement the customer due diligence (CDD) requirements on corporate vehicles including to identify the beneficial owner, identify and manage ML/TF risks, and implement AML/CFT controls based on those risks (including suspicious activity reporting and sanctions requirements). The availability of such information, however, does not exempt FIs and DNFBPs from their other obligations under Recommendations 10 and 22. They should, in any case, not rely exclusively on such information. Concern over the misuse of corporate vehicles led the FATF to strengthen and clarify the standards on transparency. 6 While the high-level policy objectives remain unchanged, further detail was included in the standards to ensure that the mechanisms for implementation are understandable. The revision of the standards was intended to provide clarity to countries on how to achieve effective implementation.
