With the recent introduction of the 5th AML Directive, registries are set to play a more important role than ever in the fight against financial crime. In this article, Marie-Charlotte Henseval, Head of KYC solutions, explains how the ability to access structured data via public and private registries for systematic KYC checks is becoming the cornerstone of compliance.
As criminals use complex company ownership structures to conceal their true identity, we are witnessing the use of public registries for ultimate beneficial ownership (UBO) information. UBO registries, first set up by the 4th AML Directive, were only accessible to government agencies and those who could demonstrate a “legitimate interest” in the subject.
Now, the 5th Anti-Money Laundering Directive (5AMLD), introduced in January 2020, aims to further improve accessibility. The general public will be able to access new “open registers”, which will provide the names, month and year of birth, nationality, residence and ownership interest of any individual who owns more than 25 percent of an EU-incorporated company.
What is in 5AMLD?
To aid transparency around beneficial ownership identification, 5AMLD introduces:
- Wider access to each member state’s national register of corporate beneficial ownership information.
- Connections between member states’ national beneficial ownership registers at EU level.
- The requirement for member states to establish a central registry (or electronic data retrieval mechanism), which allows identification of natural and legal persons that hold or control bank accounts, payment accounts or safe-deposits held by credit institutions.
- The requirement for member states to ensure that all residents’ express trusts (regardless of their tax implications) and some non-EU resident trusts are registered in the relevant national trust register.
Banks will need to report on discrepancies
These changes will mean that banks need to adapt their processes to be able to verify and collect evidence from the relevant central beneficial ownership registry. Banks will be expected to report on discrepancies between the information it holds and what is on the publicly accessible registers. However, this is only required when on-boarding new relationships that began after the regulation came into effect in January 2020.
Data collection is a marathon and not a sprint
We started building SWIFT’s KYC Registry in 2015 in response to the need to deliver a secure and structured way for correspondent banks to exchange KYC information about each other. In 2019, we expanded the Registry to our corporate community so they could equally benefit from a common platform on which to share their KYC information with their banking partners.
We’re always looking at ways we can help the banking community address the challenge of UBO identification and verification. So, expanding accessibility of public UBO registries across the EU member states is a welcome move. However, like any data collection exercise, it is a marathon and not a sprint, and it will take time for each member state to build robust registries.
Identifying opportunities for greater efficiencies
Banks will be looking to SWIFT to help them reduce the volume of manual checks and save time. We anticipate that we will be working with the banking community to explore how SWIFT’s KYC Registry can interoperate with the UBO registries to help automate the process of cross referencing.
Anticipating greater harmonisation across registries
SWIFT’s KYC Registry provides a global baseline, as agreed by participating banks and corporates, to enable institutions exchange KYC information in a standardised way. Consistent standards will need to be applied to public UBO registries, but this will require further collaboration between EU member states.
We see the interconnection between public registries and private registries, such as SWIFT’s KYC Registry, as a step towards greater harmonisation of how UBO data is handled, and a powerful way of achieving more consistent data to support the fight against financial crime.
Ultimate Beneficial Owner (UBO) legislation has been put into place to give banks and corporates clarity on who they’re doing business with.
In an increasingly global economy, financial institutions are more vulnerable to illicit criminal activities. Know Your Customer (KYC) standards are designed to protect financial institutions against fraud, corruption, money laundering and terrorist financing.
- Know Your Customer