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The Securities and Exchange Commission of Pakistan (SECP) has clarified that beneficial ownership (BO) information is necessary to detect and prevent tax evasion, corruption, money laundering, terrorist financing, and other illicit behavior involving one or more companies.

The SECP has issued Frequently Asked Questions (FAQs) on Ultimate Beneficial Ownership here on Tuesday.

According to the SECP, the BO information assists financial institutions in applying adequate customer verification procedures before commencement of the relationship with their customers. This is also likely to assist the companies themselves in understanding their ultimate owners/controllers where there are complex corporate ownership and/or control structures. Different authorities may have a recognisable legal interest in obtaining information on beneficial ownership and control in order to investigate suspected illicit activities.

Law enforcement authorities investigating and prosecuting money laundering and other crimes, tax authorities verifying compliance with tax laws, and securities regulators investigating market manipulation, unlawful insider trading, and fraud are just some of the authorities who may require information on beneficial ownership and control. Courts may also need such information in the context of corporate self-dealing and other litigation cases. Legal and beneficial ownership information can assist law enforcement and other competent authorities by identifying those natural persons who may be responsible for the underlying activity of concern, or who may have relevant information to further an investigation, the SECP said.

To a query on regularly or periodically submit the information of ultimate beneficial owners to SECP, the SECP responded no, there is no periodic or regular reporting requirement for submission of this information to SECP. However, in terms of para xx circular no. 16 of 2018, SECP may require any company or class or classes of companies to submit this information through a notice within such time period as may be specified in the notice. Any company maintaining this information shall also be bound to provide the same to any other authority or agency of the Government as required.

The Financial Action Task Force (FATF), an inter-governmental body formed to coordinate efforts on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), has issued a set of 40 recommendations which serve as international standards for combating ML/TF. Pakistan is a member of APG- a FATF Styled Regional Body, and is required to adopt FATF standards as per membership obligations and also to comply with the UN Resolution. FATF recommendation 24 require countries to take measures to prevent the misuse of legal persons for ML/TF purposes, and ensure that there is adequate, accurate and timely information available with the companies on the ultimate (actual) beneficial ownership and control of legal persons that can be accessed in a timely manner by competent authorities, the SECP added.

Copyright Business Recorder, 2019