Updated Risk-Based Guidance on Beneficial Ownership: Trusts and other legal arrangements

Updated Risk-Based Guidance on Beneficial Ownership: Trusts and other legal arrangements

• 22 December 2023
• Money Laundering
• South African Accounting Academy

Countries should assess the money laundering and terrorist financing (ML/TF) risks of misuse of legal arrangements and take preventive measures. In particular, countries should ensure that there is adequate, accurate, and up-to-date information on express trusts and other similar legal arrangements, including information on the settlor(s), trustee(s), protector(s) and beneficiary(ies), or class(es) of beneficiaries, and any other person exercising ultimate effective control, that can be obtained or accessed efficiently and promptly by competent authorities.

The FATF considered views from companies and other legal persons, financial institutions, designated non-financial businesses and professions (DNFBPs), and non-profit organisations.

This Guidance on Recommendation 25 (R.25) complements previous FATF efforts on the transparency of legal persons, by focusing on transparency requirements applicable to “legal arrangements”, which refers to express trusts or other similar legal arrangements. It is important to bear in mind that trusts are not a type of legal entity or corporate vehicle but a relationship between the principal parties to such an arrangement.

This Guidance is aimed at all stakeholders from public and private sectors that regulate, supervise, enforce, form, manage, or administer trusts or similar legal arrangements. It focuses on R.25 requirements and addresses the trust-specific features and related AML/CFT transparency obligations. It is complementary to the Guidance published on R.24 because of certain overlapping elements and aims at assisting the implementation of the requirements of R.25, adopted in February 2023. Guidance on R.24 and R.25 should be read in parallel as equally informing countries’ approaches to the implementation of the FATF Standards on beneficial ownership.

Comments were due by 8 December 2023. The FATF will consider the views received at its February 2024 Plenary.

Contents:

1. Introduction

2. Scope of R.25: Trusts and other similar legal arrangements

3. Understanding and assessing the risks associated with trusts and similar legal arrangements

4. Adequate, accurate and up-to-date information

5. Mechanisms and sources for obtaining beneficial ownership information

6. Sanctions

7. Applicability of relevant regulatory regimes and other issues

8. International co-operation

Annex A: Trust Purposes

Click here to download the Draft Consultation Guide:

https://www.fatf-gafi.org/content/dam/fatf-gafi/public-consultation/Consultation-RBA-BO-Transparency-Legal%20Arrangements%20(R.25)-Oct23.docx.coredownload.inline.docx

Relevance to Auditors, Independent Reviewers & Accountants:

• Auditors, Independent Reviewers and Accountants should be aware of the latest publications and guidance issued by regulators, such as the FATF.

• When advising trust clients (and other similar legal arrangements) or performing this function on their behalf, practitioners should be aware of the finer details and specific guidance on Beneficial Ownership.

Relevance to Your Clients:

• Relevant trusts and other similar legal arrangements should be aware of the latest publications and guidance issued by regulators, such as the FATF.

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