Beneficial Ownership: What is it about?

Beneficial ownership refers to the person or persons who ultimately own or control an asset (for example, a property or a company). It is vital to emphasise that such ownership control could benefit from its establishment either legally or illegally. A drug trafficker for example could set up a car renting service in order to appear to have legal sources of income from renting out cars for personal use while in reality the money is derived from the sale of drugs. Therefore, the identification and verification of beneficial ownership are very critical requirements for combating every forms of financial crime, tax evasion and corruption, fraud and money laundering, to trafficking and terrorist funding.

Who are your customers, vendors and third parties? Do you really know them? Do you have a full understanding of their structure & complete ownership? Many criminals or legitimate businesses would deliberately try to create multiple layers of ownership using complex but valid corporate structures across various borders which in turn makes the ownership and money movement almost untraceable.  Additionally, the presence of offshore financial secrecy havens such as the Cayman Islands only goes to further complicate beneficial ownership information.

The 5th EU Money Laundering Directive and the Financial Action Task Force (FATF) Recommendations 24 & 25 provides a comprehensive guidance towards combating the ability to disguise beneficial ownership. This guidance should be employed in tandem with regular training of your employees responsible for performing due diligence, Ongoing due diligence and monitoring of business relationships, Employing enhanced measures for your high risk clients and adopting a risk based approach to customer due diligence.

Please kindly note the content of this writeup is only intended to provide general information and not to provide any legal advice. Also, if you would like to know more about this subject matter or any other areas within my line of interest, you are most welcome to get in touch with me via email contact@emgfinancialcrimeconsulting.co.uk