Risk-based Approach for Trust and Company Service Providers

Trust and company service providers (TCSPs) are involved in a wide range of services and activities for their clients. These services include:

acting as a director or secretary of a company or similar position,
providing a registered office or business address for a company,
acting as trustees of an express trusts, among others.

Not all of the persons and professionals active in this sector provide the same services.

Depending on the country in which they operate, TCSPs can also take different forms, from individual firms to subsidiaries of large financial institutions. Criminals may seek TCSP services to help them retain control of proceeds of their crimes, while disguising the origin and ownership of these assets. Through the creation of shell companies or trusts, they can conceal their ownership and create a veneer of legitimacy.

This guidance highlights the need for a sound assessment of the ML/TF risks that trust and company service providers face so that the policies, procedures and initial and ongoing client due diligence measures can mitigate these risks. This risk-based approach is central to the effective implementation of the FATF Recommendations to fight money laundering and terrorist financing.

This guidance is aimed at TCSP practitioners, countries and their competent authorities, including supervisors of TCSPs, as well as practitioners that have TCSPs as customers. The guidance aims to support TCSPs in the design of effective measure to manage their ML/TF risks, when establishing or maintaining business relationships. In particular, it explains the obligation for TCSPs to identify and verify beneficial ownership information and provides examples of simplified, standard and enhanced CDD measures.

The guidance contains a section for supervisors of TCSPs. It explains the risk-based approach to supervision, as well as the supervision of the risk-based approach. The guidance highlights the importance of supervision of beneficial ownership requirements in relation to a trust or other legal arrangement so that such information is maintained and available in a timely manner. The FATF developed this non-binding guidance with significant input from the TCSP sector, including through a public consultation in March 2019, to ensure that it reflects their practical expertise and good practices. It replaces the version of 2008 and brings it in line with the current FATF Recommendations.