Enhanced ownership transparency needed to fight financial crime

CPA and IFAC are calling for greater beneficial ownership information to tackle rising money laundering, corruption, and tax evasion.

Enhanced ownership transparency needed to fight financial crime
Steve Randall

The rising risk of financial crime is being exacerbated by the large amount of COVID-19 relief money moving across the global economy and tackling these crimes requires collaboration.

Stakeholders need to work together to ensure that legal frameworks and accurate information is maintained and this includes greater transparency for beneficial ownership information.

Knowing who ultimately owns or controls corporations and other entities is a key facet of tackling financial crime, as detailed in a new report from the Chartered Professional Accountants of Canada (CPA Canada) and the International Federation of Accountants (IFAC).

"Beneficial ownership information, which identifies who has controlling ownership of an entity, is important to the discovery of financial crimes," said CPA Canada President and CEO Joy Thomas. "Enhancing the transparency of this information should strengthen anti-money laundering regimes and help in seeking out lawbreakers and their proceeds of crime."

For Canadian financial entities, securities dealers, life insurance and money services business, FINTRAC sets out their obligations when they need to confirm the existence of an entity:

  • obtaining information that describes the ownership, control and structure of the entity, including corporations and trusts; and
    • if the entity is a corporation, obtaining the names of all the directors, as well as the names and addresses of the beneficial owners;
    • if the entity is a trust, obtaining the names and addresses of all trustees and known beneficiaries and settlors of the trust;
    • if the entity is other than a corporation or trust, obtaining the names and addresses of the beneficial owners; and
  • taking reasonable measures to confirm the accuracy of the information obtained and keeping records of the information obtained and the measures taken to confirm its accuracy.

The information must also be kept up to date as part of ongoing monitoring of business relationships.

For those clients assessed as being high risk, there are additional requirements including enhanced monitoring.

More to be done
Although there are recommendations from the Financial Action Task Force, the way that they are implemented by countries varies and feedback from accountants globally reveals that:

  • Establishing a public beneficial ownership registry does not immediately ensure that a country's law enforcement and other agencies have access to accurate information in a timely manner.
  • In several jurisdictions, the move to a public registry has been a phased approach, starting with non-public registries and then transitioning to public registries; and
  • Verifying information and ensuring appropriate levels of access are key factors in a registry's efficacy.

"The global accountancy profession, with its strong public interest mandate, is a committed partner in the fight against financial crime," said Kevin Dancey, IFAC CEO. "We are eager to advance important policy conversations, including those over beneficial ownership, and to work meaningfully alongside governments, law enforcement and other stakeholders to combat financial crime in all its forms."