In the global fight against money laundering and the financing of terrorist activities, governments worldwide are adopting more stringent measures to enhance transparency and companies’ financial internal control. These efforts aim to create a regulatory framework that discourages illicit financial activities and fosters transparent business practices. Recent developments in beneficial ownership reporting highlight this commitment, with countries like China, Italy, and Vietnam taking significant steps to align with international standards.
In 2012, the inter-governmental Financial Action Task Force (FATF) issued Recommendations, highlighting the need for transparency through customer due diligence (also known as Know Your Customer practices), which included identifying the beneficial ownership of companies (Recommendation 24). The FATF's recommendations influenced regulatory actions across various jurisdictions, shaping the global approach to beneficial ownership reporting. For example, in Hong Kong, these Recommendations led to a Companies (Amendment) Ordinance in 2018, requiring companies to identify and maintain registers of significant controllers.
The Organization for Economic Cooperation and Development (OECD) has also been committed to creating a clear regulatory framework and strengthening international cooperation to combat tax fraud, terrorist financing, and money laundering. In November 2023, it hosted a training workshop titled "Beneficial owners: Issues, challenges, and detection strategies for tax auditors." The workshop built upon practices highlighted in the 2021 Global Forum on Transparency and Exchange of Information for Tax Purposes toolkit ("Building Effective Beneficial Owners Frameworks") and the G20/OECD Principles of Corporate Governance.
Following the recommendations of the FATF and OECD, the European Union has taken steps to raise the issue of transparency in combating financial crimes and enhancing foreign trade. In 2015, Regulation 2015/849 of the European Parliament and of the Council outlined a framework for preventing the misuse of the financial system for illicit purposes. Among the EU member states, Italy has been proactive in implementing relevant regulations. In addition to the 2007 anti-money laundering legislative decree (Legislative Decree 231/2007), on October 10, 2023, the Ministry of Enterprises and Made in Italy published on the Official Gazette No. 236 the Directorial Decree of September 29, 2023, indicating the operationality of the system for reporting data and information on beneficial ownership. The decree mandated 60 days (until December 11) for obligated entities to communicate their beneficial owners to the Italian Business Register, highlighting Italy's commitment to transparency and regulatory compliance.
In Asia, the OECD Roundtable of 2015 identified the need for an effective regulatory framework to allow for beneficial owners’ reporting in Asia. Among the Asian Roundtable participants, Vietnam has been proactive in enhancing its anti-money laundering efforts in recent years. In 2022, the Vietnamese government issued a new anti-money laundering law (Law No. 14/2022/QH15), along with an additional decree on April 28, 2023 (Decree No. 19/2023/ND-CP), indicating which types of institutions shall conduct KYC practices, and how to determine a company’s beneficial owner.
In this global landscape, China's regulatory journey towards transparency in beneficial ownership reporting is evident in its proactive measures. In 2017, the People’s Bank of China published the “Notice on Strengthening the Work of Identification of Clients for Anti-money Laundering” (Yinfa [2017] No. 235), providing a framework for institutions that have the obligation to fight money laundering activities to follow and implement. Subsequently, in 2018, the “Notice of the People's Bank of China on Issues Related to Further Improving the Identification of Beneficiary Owners” (Yinfa [2018] No. 164) was issued, providing more information on how to identify different institutions’ beneficial owners and stressing the need for customer due diligence (KYC) for obligated entities, such as financial institutions. In case the institution is not able to identify its beneficial owners, it can entrust a complying third party to carry out the identification.
The recent stricter implementation of the Yinfa [2018] No. 164 shows China’s commitment to combatting money laundering activities and terrorist funding, by aligning its domestic regulations with international standards by enhancing companies’ disclosure and promoting a more transparent and secure financial system.
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