Timely reminder of beneficial ownership requirements in the US
Nasdaq.com has published a useful summary of the forthcoming beneficial ownership reporting requirements which come into force on 1st January 2024 as a result of the new Corporate Transparency Act (CTA), a new federal law that will require certain entities to file a Beneficial Ownership Information (BOI) Form with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The BOI Form will require entities to provide information on their beneficial owners — individuals who own or control at least 25% of the entity, or who exercise substantial control over the entity.
The CTA is intended to help law enforcement agencies track down and prosecute criminals who use shell corporations to launder money and commit other financial crimes. The law is also intended to increase transparency in the corporate ownership structure, which will make it more difficult for criminals to conceal their activities.
The BOI Form must be filed within 30 days of the entity’s creation or registration and must be updated within 30 days of any change in beneficial ownership information. Failure to file the BOI Form or to file it accurately can result in civil penalties of up to $500 per day, and criminal penalties, including time in prison.
The CTA is a complex law with a number of important provisions. Heer are some of the key things to keep in mind that the article covers:
- The BOI Form is a complex document that requires entities to collect and report a lot of information, including the name, date of birth, address, and identification number of each beneficial owner.
- The law is not clear on who is responsible for determining who is a beneficial owner, and there is no clear definition of what constitutes “substantial control”.
- The law does not specify how the information collected on the BOI Form will be used by the government.
- There is a risk of privacy violations, as the BOI Form will require entities to collect and report personal information about their beneficial owners.
- The law exempts certain entities, such as banks, publicly traded companies, and large operating companies.
- The law provides for a registration process for individuals who are involved in multiple entities. This will allow individuals to register their information with FinCEN once and have it linked to all of the entities they are involved in.
- The law requires entities to safeguard the personal information they collect on the BOI Form.
The CTA is a significant new law that will have a major impact on businesses of all sizes. Businesses should be aware of the law and take steps to comply with it.
JMLSG updates Travel Rule guidance
Following the Financial Conduct Authority’s (FCA) announcement earlier in August that cryptoasset businesses in the UK will be required to comply with the Travel Rule from 1 September 2023, the Joint Money Laundering Steering Group (JMLSG) has published final revisions to Sector 22 (Cryptoasset providers and custodian wallet providers) in Part II of its Guidance.
The new guidance relates to the provisions of The Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLRs) that implement the Travel Rule for cryptoasset transfers in the UK. The new obligations per Regulations 64A-64H come into effect today1 September 2023.
UK guidance on sanctions penalties
The UK’s Office of Financial Sanctions Implementation (OFSI, part of HM Treasury) has published new guidance setting out the powers by which OFSI can apply a monetary penalty in the event of a breach of financial sanctions legislation as defined by Sanctions and Anti-Money Laundering Act (2018) (SAMLA), which amended the Policing and Crime Act 2017, which in turn contains the powers for HM Treasury to impose monetary penalties for breaches of financial sanctions.
The new guidance sets out:
- an explanation of the powers given to the Treasury in the 2017 Act;
- a summary of OFSI’s compliance and enforcement approach;
- an overview of how OFSI will assess whether to apply a monetary penalty, and what they will take into account;
- an overview of the process that will decide the level of monetary penalty; and
- an explanation of how OFSI will impose a monetary penalty, including timescales at each stage and rights of review and appeal.
OFSI confirms the guidance will be reviewed periodically.
MAS gets in on the act too with AML/CFT guidance
The Monetary Authority of Singapore (MAS) has issued a Dear CEO letter to financial institutions (FIs) in Singapore, setting out additional guidance on how to effectively detect and manage sanctions-related risks.
The letter highlights the importance of having strong Board and Senior Management (BSM) oversight of sanctions-related risks. The BSM should, suggests the letter, set a clear risk appetite in relation to sanctions-related risks and should ensure that clear roles and responsibilities are in place for detecting, monitoring, and managing these risks. FIs should consider using data analytics to strengthen their sanction-risk detection capabilities and should consider implementing a lookback mechanism to proactively identify existing customers that have previously transacted with sanctioned persons.
The circular also emphasizes the importance of FIs being aware of the reputational, legal, and operational risks arising from any actions they might take following unilateral sanctions imposed by other jurisdictions. FIs should carefully balance these risks against the potential impact on their business operations.
Overall, the letter provides FIs with clear guidance on how to meet MAS’s expectations in terms of sanctions compliance. FIs should review their AML/CFT frameworks and controls against the additional guidance set out in the letter and take steps to enhance their controls as appropriate if any gaps are noted.
Some of the letter’s highlights, bulleted are as follows:
- FIs should have a clear risk appetite in relation to sanctions-related risks.
- FIs should set clear roles and responsibilities for detecting, monitoring, and managing sanctions-related risks.
- FIs should use data analytics to strengthen their sanction-risk detection capabilities.
- FIs should consider implementing a lookback mechanism to proactively identify existing customers that have previously transacted with sanctioned persons.
- FIs should be aware of the reputational, legal, and operational risks arising from any actions they might take following unilateral sanctions imposed by other jurisdictions.
A selected summary of key developments for regulated financial institutions
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