CSP thematic reviews: Beneficial ownership obligations

On 30 March 2022, the Financial Intelligence Analysis Unit (“FIAU”) published the results of the thematic reviews conducted on company service providers (“CSPs”). The thematic reviews were principally aimed at assessing the level of compliance with beneficial ownership obligations by CSPs.

According to the FIAU, the thematic examinations yielded very positive results. The results indicated that most CSPs are compliant with their beneficial ownership related obligations, and non-compliance was limited to exceptional cases. It was also positively noted that no systematic breaches were identified at the individual CSP level and within the CSP sector throughout the thematic review. CSPs have demonstrated that they have established adequate written policies and procedures which stipulate how beneficial ownership related obligations are to be fulfilled.

Whilst the results from such thematic reviews are rather positive, the FIAU has highlighted certain areas of improvement, which are being summarised below:

  • CSPs need to ensure that the written policies and procedures are subject to regular review to make sure that that these reflect any changes in the CSP’s activities and legislative changes.
  • CSPs need to take the necessary steps to inform their officers and employees of updates and/or changes in procedures, and what is expected of them when applying them.
  • In addition to obtaining the ownership and control structure, CSPs should subsequently conduct independent research to verify the information on the structure chart. This can be done by consulting online commercial databases, company registries, relevant audited accounts or by obtaining certification by any of the persons referred under Section 4.3.1.2(i)(b) of the implementing procedures (“IPs”).
  • Recognising the senior managing official as the beneficial owner (“BO”) of the customer should only be resorted to after exhausting all possible means to identify a BO and if there are no grounds of suspicion. A record of the actions taken to try to identify a BO should be retained by the CSP as part of its recording keeping obligations.
  • With respect to verification of identity of the BOs, the CSPs’ written procedures need to define which sources meet the criteria of ‘independent’ and ‘reliable’ when obtaining identity verification documentation and ensure that officers and employees are aware of these procedures.
  • The frequency of reviews as part of the ongoing monitoring should be based on the level of customer risk assessed by the CSP in line with the risk-based approach concept and based on the expected changes. In this regard, the FIAU highlighted that, when changes in beneficial ownership are expected to take place during a business relationship due to the nature of the customer (e.g. a recently set-up collective investment scheme) or due to information available (e.g. customer advising during on-boarding stage on a planned share transfer), it is of utmost importance that the frequency of periodic reviews reflect these expectations.
  • In case of business relationships assessed to pose higher risks, reviewing the validity of beneficial ownership information as part of ongoing monitoring procedures needs to include obtaining fresh independent documentation from reliable sources, rather than relying solely on customer declarations.
  • CSPs need to obtain proof that any identified changes in beneficial ownership information were communicated accordingly to the designated company register by the customer.
  • CSPs should familiarise themselves with beneficial ownership concealment red flags which may become apparent during the provision of CSP services. In this publication, the FIAU makes reference to various sources which list a number of red-flags which would be applicable within the context of a CSP.

The full report may be found here.

Should you require any information or have any queries in relation to the adoption of implementation of anti-money laundering and counter terrorist financing obligations for company service providers kindly contact Mario Zerafa.