In an increasingly globalized world, cross-border ownership is fast becoming the norm, expedited by advancements in technology and an ever-evolving mobilized workforce. For the most part, cross-border ownership and corporate structures are completely above board. Companies seeking to maximise shareholder returns through growth, or vertical integration in their supply chains, acquire and merge with enterprises in different jurisdictions with comparative advantages.
Think of a US fashion company buying into the manufacturing enterprise in China, or a Singaporean construction company investing in a timber mill in Indonesia. Regardless of the industry or activity, customers, investors and regulators alike have a vested interest in understanding who they are dealing with.
In some cases, not all is as it seems. Criminal masterminds disguise themselves through a web of corporate vehicles that span multiple jurisdictions and nations. As financial crime grows in scale and pervasiveness, countries are collectively seeking to combat illicit activities through increased regulation driven by inter-governmental bodies.
The FATF acts as the global standards setter for UBO information management and has developed 40 recommendations designed to assist countries in battling financial crime. The FATF’s agenda is driven by its President, a role held for a two year term by a senior official appointed from among its members.
At the time of the G20 Finance Ministers meeting in February 2021, the then FATF President Dr Marcus Pleyer addressed the forum, commenting that ensuring transparency of beneficial ownership is “critical for everything from a fair tax system to stopping money laundering” and noting that the FATF is “reviewing the standard to consider how it can be strengthened further”.1
As of April 2022, it is reported that 76% of countries have now satisfactorily implemented all 40 recommendations, with 206 jurisdictions passing new laws and regulations to strengthen their compliance with the FATF2.
The role of the President was passed to T. Raja Kumar on the 1st July 2022. Mr Kumar acts on behalf of the Singaporean Government and as one of his first duties, confirmed the priorities for the FATF include the “ongoing work to review and ensure that FATF standards remain up to date… and amend the FATF recommendation on beneficial ownership information for trusts and other legal arrangements”3.
What are some of these new regulations?
With an increasing focus on the need for transparency, governments around the world are introducing legislation requiring the formal reporting of beneficial ownership by registered entities.
Whilst it is not possible to outline every piece of legislation, the below provides a good cross-section of the existing and proposed legislation.
The European Union led the way in 2017 with its introduction of the Fourth Anti-Money Laundering Directive (4AMLD), and later the Fifth Directive (5AMLD) in 2018. These directives required member states to develop national beneficial ownership registries to identify persons who ultimately own or control an entity including senior executives, trustees and others.
In 2019, the Companies Commission of Malaysia introduced the requirement to hold accurate, current and verified information on beneficial owners via the ”Guideline for the Reporting Framework for Beneficial Ownership of Legal Persons”.
In the latter half of 2020, several countries in the Middle East Region introduced UBO reporting requirements, including UAE, Bahrain and Oman. The UAE Government required all entities registered in the UAE to create a register of the ultimate beneficiary by the 30 June 2021, with a penalty regime for non-compliance to take effect from the 1 July 2021.
In the United States, the government recently passed the National Defense Authorization Act in 2021, requiring companies to have written procedures to identify the UBO of legal entity customers and for reports to be filed with the US Treasury’s Financial Crimes Enforcement Network (FinCEN).2
According to Transparency International, India has also made ”significant progress by requiring companies to maintain beneficial ownership information in their membership registry”3 in accordance with Principle 1 of the G20 Principles, which requires member countries to adopt effective anti-corruption measures.
On 27 December 2021 in China, a draft document titled “Interim Measures on Information Filing of Ultimate Beneficial Owners of Market Players” was published jointly by the State Administration for Market Regulation of the People’s Republic of China (SAMR) and the People’s bank of China (PBOC). Due to take effect from 1 March 20224, it was temporarily postponed, however its existence suggests that closer UBO scrutiny is on the cards.
Most recently, in 2021, in the United Kingdom, the registrar of companies has mandated that all corporations must indicate a person with significant control (PSC) who is also known as beneficial owners.
In Singapore, the Monetary Authority of Singapore demands that companies, foreign companies and LLPs (unless exempted) will be required to maintain beneficial ownership information in the form of a register of registrable controllers, and to make the information available to public agencies upon request.
With this changing legislation around beneficial owners, it is imperative for compliance officers to tap on proven and effective smart tools to aid their due diligence processes.
Whilst there is general agreement that regulations are required to combat financial crime, the implementation of laws in each country that complement each other for international compliance and trade is fraught with difficulty.
There is an ongoing debate about privacy and whether these registries should be publicly available. There is also disparity between the prescribed ownership percentages, type of information to be reported and timeliness of reporting.
With the increase in legislation comes a heavier onus on compliance professionals to not only adhere to the reporting but also to keep up to date with changing requirements and different interpretations across jurisdictions.
And compliance professionals simply do not have time to trawl through complicated paper trails to unravel corporate structures and follow the sequence of shareholdings and directorships to determine the UBO.
Technology can speed up the process so that compliance professionals can focus on regulatory requirements and not get bogged down in red tape and bureaucracy.
How AsiaVerify can help
AsiaVerify is transforming business verification across the Asia Pacific region (APAC), helping businesses overcome the challenges of conducting business across borders, languages and cultures and enter Asian markets with confidence and ease.
Regardless of which legislative framework(s) your target company falls into, we can verify or uncover the ultimate beneficial ower with our smart technology that collates individual shareholder information.
AsiaVerify is committed to bringing you the latest in AI-powered technology, cutting through bureaucratic red tape and providing instant access to APAC’s most comprehensive business, customer and ultimate beneficial owner verification data, sourced from the most authoritative government registry information across Asia, all fully translated and in real-time.
You can benefit from our award-winning technology platform, that leverages Natural Language Processing (NLP), Asian Optical Character Recognition (ACR) and our proprietary Artificial Intelligence and translation technologies to reduce your compliance blind spots by up to 100%.
Want to know more? Speak to one of our multi-lingual regulatory experts, or book your free demo to find out how AsiaVerify can solve your compliance challenges <contact form link here>.
1 “Intervention by Dr Marcus Pleyer, FATF President” 26 February 2021 <FATF>
2 “Report of the State of Effectiveness and Compliance with the FATF Standards” April 2022 <FATF>
3 “Priorities for the Financial Action Task Force under the Singaporean Presidency” June 2022 <FATF>
2 Geoff Cook, Gilly Kennedy-Smith and Edward Devenport “Consultation heralds change in beneficial owner transparency” 1 November 2021 <Lexology.com>
3 Jordan Owen, “The rise of ultimate beneficial ownership reporting” 16 June 2021 <dwfgroup.com>
