An intergovernmental organisation established on the initiative of the G7, the Financial Action Task Force (FATF) defines international standards in the fight against money laundering and terrorist financing. It has issued 40 recommendations that are non-binding but have been respected by more than 180 countries. Since their initial drafting in 1990, the recommendations have been revised several times. Recently, two consultations in view of additional amendments have been opened. The first aims at an update of the FATF Guidance Note on Recommendation 24, which relates to transparency and beneficial ownership of legal persons. The second concerns Recommendation 25 and its interpretative note on trusts.
Proposed Amendments
In March 2022, the FATF adopted amendments to Recommendation 24, and directly initiated the updated guidance on beneficial ownership.
The changes provide for competent authorities to have prompt access to complete and standard information on beneficial owners. The FATF does not deem a central register of beneficial owners as the only mode to gather the relevant information. In fact, it also allows for alternative systems that are just as effective. In Switzerland, the current solution is already in line with the existing FATF recommendations: a shareholder who acquires at least 25% of a Swiss company must provide personal information (i.e. name and address) of the beneficial owners within one month and announce any change within three months (art. 679j of the Swiss Code of Obligations). However, the question arises whether this system meets the requirements of the proposed Recommendations. Certain elements, such as the length of the deadlines or the impossibility to access the information before July 2015, lead us to believe that Switzerland will have to adapt its rules.
Similarly, a consultation is also underway for Recommendation 25 and its Interpretative Note (R.25/INR.25) on transparency and beneficial ownership of legal arrangements. Both are being revised to move closer to the FATF’s goal of preventing the misuse of legal arrangements for money laundering or terrorist financing. The FATF is considering several measures, including the distinction between beneficial owner and beneficiary to further clarify the concept of ownership and control in the context of legal arrangements. In addition, FATF would like to subject professional and non-professional trustees to the same requirements by extending to the latter the obligation to retain records for at least five years. In the consultation process, the active input from stakeholders, such as trustees or financial institutions, is therefore essentiel.
In its opinion in relation to Recommendation 25, STEP recalls that a trust may not have a legal connection with the jurisdiction in which it is established. Therefore, it considers appropriate to use the laws of the jurisdictions in which a trustee is resident or in which the administration of the trust is carried out.
The consultations ending early December 2022, the FATF will consider the submissions received and the proposed revisions at its February 2023 meeting.
THE GOVERNANCE LAW FIRM
