Financial crime video series: 5 must dos when assessing beneficial ownership

Christian Blackwell

Hello, and welcome to the next in our series of videos on financial crime. I'm here today with Tunde Fasoyiro to talk about the five must dos when assessing beneficial ownership. Tunde, is self-certification sufficient to assess beneficial ownership?

Tunde Fasoyiro

I don't think you can place sole reliance on self-certification to assess a beneficial owner. I think more information is required in determining verification and identification of a beneficial owner. I think that has become even more important since the release of the Panama papers in 2015.

Christian Blackwell

And what techniques can we use to verify beneficial ownership?

Tunde Fasoyiro

One of the ways of doing this is either through documentary information or non-documentary information. So, information can be – information that can be used. It could be things like the share register or an organisational chart that shows the different percentages, or you could use a corporate ownership structure, or you could use sort of government databases to provide authenticity of who the beneficial owners are.

Christian Blackwell

And I've heard about the 25 per cent rule. Could you tell me a little bit more about that?

Tunde Fasoyiro

The 25 per cent rule is being used by quite a lot of jurisdictions globally. It is used in the US, in the UK, in Canada. And what this means basically is that you not only have to determine who a beneficial owner is, you need to assess whether an individual owns 25 per cent or more in an entity. Now, in some financial institutions might drill down, depending on what their risk assessment is. So, they may determine that they're going to use a lower threshold of, say, 10 per cent, for instance if they are looking at a customer who they've risked assessed as having a high level of risk.

Christian Blackwell

And what about trusts? What specifically would we do differently with trusts, in terms of verifying beneficial ownership?

Tunde Fasoyiro

Trust could be made up of settlers, trustees and beneficiaries. So, in terms of assessing beneficial ownership, you need to be able to determine who those various owners of the trust are, which can fall within those sort of different categories. Now, it may well be that that's not quite apparent, especially if you're looking at beneficiaries. So you may now need to drill down to understand the classes of – different classes of beneficiaries, in order to be able to identify who the real beneficial owners are.

Christian Blackwell

What can you tell me about the OFAC 50 per cent rule, and why is that so important?

Tunde Fasoyiro

Any entity owned in the aggregate, directly or indirectly, 50 per cent or more, by one or more blocked persons could be classified as a sanctioned entity by OFAC. Now, these rules could be violated unintentionally, so it's important for firms, for compliance officers to ensure that they carry out robust due diligence within the entity to consider the various levels of ownership in the aggregate.