Banks urged to probe for beneficial ownership in citizenship deals 5 November 2915 Banks urged to probe for beneficial ownership in citizenship deals Beneficial owner is a legal term where specific property rights ("use and title") in equity belong to a person even though legal title of the property belongs to another person. Black's Law Dictionary (2nd Pocket ed. 2001 pg. 508). Money laundering and terrorist financing risks are present in citizenship deals and investment schemes offering residency and banks need to take extra care to establish beneficial ownership, a lawyer said. Such deals could easily fall under the jurisdiction of U.S. law enforcement agencies. "Banks need to be compliant and worry about the USA Patriot Act , the Foreign Corrupt Practices Act, Bank Secrecy Act and the Financial Crimes Enforcement Network's regulations. Imagine there is a local tax offence or a local bribery offence and money flows into a big account and later, someone helps structure that money into citizenship and deals with an offshore location. If there were meetings in Miami, emails via Yahoo and a few telephone calls from New York, then prosecutors have all they need to go after someone for AML/CFT violations. The United States had stepped up its enforcement against violations of anti-money laundering (AML), know your customer and countering terrorist financing rules in recent years against some of the world's biggest organisations. Double down Banks were involved any time high-net-worth individuals purchased citizenship and residency abroad and that any time they gain access to jurisdictions such as the United States or UK, they would be scrutinised for the AML, tax evasion and terrorism risks they posed. Bank lawyers and compliance officers are urged to double down on assessing beneficial ownership. Banks already have the basics of compliance down, but they need to enhance the beneficial ownership identification, and the customer due diligence. They are just not making enough money off of blind trusts and structured agency agreements [structures often used when the wealthy purchase citizenship and residency] to counterbalance what they could lose. Break through the barriers and learn who your clients really are. Yet, how far financial institutions must burrow down to find a beneficial owner is unclear. For example, the U.S. FATCA Act 2010, stresses the important of beneficial ownership of a bank account or business down to the 10 percent threshold. The Financial Action Task Force (FATF), the international AML standard-setter, recommends probing down to the 25 percent level. Some of the world's largest banks in financial hubs such as London, New York, Hong Kong and Singapore opt for a 20 percent threshold as a healthy medium. In a conference held recently in Dubai, expert Hutman said banks should not fixate too much on ownership shares, because if a bank has a bad customer, even one percent may be too much. "Banks should not be looking at external [factors]. If they are just looking at minimum percentages, they need to remember that the bedrock of AML compliance is that risks must always be adjusted; there is no 'one-size-fits-all' methodology," he said. "If you were a bank in Dubai and the beneficial owner of an account is Iranian or a member of the Al Quds forces, the fact that you hit 20 percent is not helping you at all." The U.S. Treasury has floated rules for beneficial ownership with its UK counterpart planning to release its rules in 2016.