FATF: Mistakes common in UBO info for AML/CFT


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FATF seeks accurate, up-to-date UBOs in AML/CFT

It’s the mid-point of 2016, and no issue has been bigger in AML/CFT this year than the identification of Ultimate Beneficial Owners. This issue has been brewing for years, but the Panama Papers and various other high-profile exposes have kept UBOs in the international spotlight.

In fact, FATF made a point of addressing it once again at its plenary session in Korea in June. And while the importance of UBOs in AML/CFT Compliance is a given, the accuracy of UBO information and its timely exchange remain problems, according to FATF.

FATF, which has been working on the UBO issue for more than 25 years, notes that while the requiring of the collection of UBOs during AML/CFT Customer Due Diligence (CDD/KYC) has become a core part of international AML/CFT frameworks, the successful implementation of that requirement remains problematic.

FATF singled out several persistent problems, the biggest of which are timely exchanges of UBO information and the prevalence of inaccurate or out-of-date information in registries or company documents.

The FATF report noted, for example, that while companies are required to provide information about their shareholders or members, registries that collect this information often do not verify independently the data the companies provide. And when financial institutions rely on registry data for their CDD/KYC collections, their AML due diligence can be derailed even though they are adhering to sources of information perceived as high quality.

This issue of accuracy is further compounded by the fact that while companies are required to provide information on shareholders or members, they “are often not subject to sanctions for failing to keep their shareholder registry accurate and up-to-date as required,” according to FATF. FATF noted further that even when accurate and current UBO information is available, obstacles like data protection and privacy laws often hinder “the competent authorities” from getting timely access to this critical information. And that is a problem compounded by the international element so central to the international financial system.

FATF in its report complimented the work that banks do with UBOs in their AML/CFT customer due diligence work. But the report noted that AML/CFT-regulated institutions beyond banks remain major problems: “CDD requirements, including requirements to identify and verify beneficial owners, are often well-implemented by banks, but much less so by other key gatekeepers (e.g., company formation agents, lawyers, and trust-and-company-service providers). This problem is exacerbated because supervision of these sectors for compliance with these requirements is often less robust than it is in the banking sector.”

FATF has emphasized repeatedly that it will focus on these implementation issues related to Ultimate Beneficial Owners in AML/CFT Compliance. Regarding the information-sharing challenge, FATF in June shared its consolidated standards regarding information sharing.

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