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### Introduction and purpose
- Beneficial ownership identifies "the natural person who ultimately owns or controls a legal person" and supports efforts to fight money laundering (ML), tax evasion, terrorist financing (TF), corruption, asset recovery, detection of fraud and administrative violations, protection of the environment, and mitigation of climate change.
- Domestic implementation of beneficial ownership transparency faces setbacks including:
  - data privacy and protection rules;
  - weaknesses in completeness and quality of information;
  - limitations in access; and
  - constraints on effective sharing of information.

### Rationale for a sectoral approach
- Definition and focus:
  - The "sectoral" approach tailors collection, access, and use of beneficial ownership information to specific risks in economic sectors (e.g., ML/TF, corruption, organized crime, tax evasion, environmental crimes, national security, enforcement of sanctions).
  - Sectoral approaches target beneficial ownership information from any relevant type of legal entity or arrangement that best serves the specific sector and its risks.
- Core characteristics:
  - Differs from the AML/CFT registry approach and does not replace or address AML/CFT beneficial ownership requirements.
  - Does not have the ultimate purpose of compliance with international standards such as the AML/CFT FATF standard.
  - Can take different forms and does not necessarily entail a registry; forms depend on the sector, risks, and country capacity and beneficial ownership infrastructure.
- Design principles (high level):
  - Tailor to country risk and context, mindful of implementation capacity, costs, and benefits.
  - Ensure availability and use of beneficial ownership information in high-risk sectors where other sources do not provide necessary details or formats.
  - Minimize burden and leverage existing capacity; use technology where feasible; allow low-technology options (e.g., adding a beneficial ownership field to sectoral forms).

### Gaps between AML/CFT registries and sectoral needs
- Reasons AML/CFT registries may not meet sectoral needs:
  - High-risk sectors may need lower thresholds for ownership or coverage of individuals who financed an acquisition.
  - Additional details may be required (example: nationality and place of birth for enforcement of sanctions or protection of sensitive technology).
  - Supervisors may require information covering trusts or information searchable by real estate address.
  - Administrative agencies managing financial disclosures by public officials may lack access to non-public beneficial ownership information.
- Practical implication:
  - AML/CFT registries may not cover each sector’s needs at once, creating scope for sectoral mechanisms.

### International standards and complementarities
- FATF and multi-pronged approach:
  - The FATF AML/CFT standard aims to prevent misuse of legal persons and arrangements for ML or TF and supports prevention and detection of other offenses.
  - March 2022: date of FATF standard update requiring a multi-pronged approach to obtain and hold beneficial ownership information that is adequate, accurate, up-to-date and available to competent authorities in a timely manner at domestic and international levels.
  - Under the multi-pronged approach, countries must ensure beneficial ownership information is available from different sources and mechanisms, including information held by a public authority or body (for instance, a registry).
- OECD standards:
  - The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes provides standards for EOIR and AEOI.
  - EOIR requires information that is "foreseeably relevant" for tax purposes (such as identity of legal and beneficial owners) be available and accessible to tax authorities.
  - AEOI is the most comprehensive cross-border exchange mechanism on beneficial ownership information for foreign financial accounts.
  - EOIR and AEOI standards leverage extensively the information collected under the AML framework, including beneficial ownership information as defined under the FATF Recommendations.
- Institutional complementarity:
  - Sectoral approaches are complementary to centralized AML/CFT initiatives and to FATF/OECD mechanisms rather than substitutes for international-standard compliance.

### Practical evidence and replication potential
- Procurement experience during COVID-19:
  - A significant number of countries receiving Fund emergency financing developed legal and institutional foundations and collected and published beneficial ownership information for entities involved in COVID-19-related public procurement.
  - This experience suggests that sectoral approaches may be replicable in other high-risk sectors such as real estate, even under low resources or time constraints.
- IMF sectoral experience — procurement during COVID-19 (selected figures and outcomes):
  - The Fund sought specific commitments on governance measures for 73 countries receiving emergency financing, including measures related to beneficial ownership.
  - The most frequent commitment among countries receiving emergency financing was the targeted audit of emergency spending in 76 percent of requests.
  - Commitment to publish beneficial ownership information of companies awarded public procurement contracts appeared in 60 percent of all requests.
  - Three years after most governance measures were committed, implementation rate of measures for pandemic related spending reached 80–90 percent, on average.
  - Measures to publish beneficial ownership information of companies awarded pandemic-related contracts were implemented fully (60 percent) or substantially (around 30 percent), resulting in a combined implementation rate of 90 percent.
  - For countries with FATF Mutual Evaluation Reports (MER), 79 percent of the countries that implemented the beneficial ownership and procurement commitments had been rated with “low” effectiveness toward beneficial ownership transparency; another 21 percent had been rated as “moderate”; none achieved “substantial” or “high”.

### Sector-specific risks and macroeconomic relevance — Real estate
- Prevalence of risks:
  - According to a FATF report, 53 percent of countries rated ML/TF risks associated with the real estate sector as either high or medium-high.
- Documented inflows and illustrative figures:
  - Approximately £4.2 billion worth of properties in the London property market had been bought with suspicious wealth (2017 report).
  - More than $2.6 billion in suspicious funds invested in commercial real estate in 22 U.S. states over the last 20 years.
  - Up to $5 billion in criminal funds was laundered through Vancouver real estate in 2018 alone, contributing to an approximate five percent increase in house prices.
- Macroeconomic and financial stability impacts:
  - Anonymous purchases can create opaque, high-risk exposures for banks and lead to loan write-offs, liquidity pressures, reputational damage, and penalties for AML non-compliance.
  - Illicit flows in real estate can inflate property prices, crowd out legitimate buyers, misallocate capital, reduce tax effectiveness, and perpetuate housing inequality.
- Common typologies:
  - Use of complex structures and offshore entities (shell companies, trusts) often facilitated by lawyers and corporate service providers to conceal ownership and frustrate seizure.

### EITI and extractive sector experience (Box 1 summary)
- EITI requirements and reforms:
  - EITI requires publicly available beneficial ownership registries for corporate entities that apply for or hold an interest in oil, gas, and mineral resources (EITI requirement 2.5).
  - 2023 EITI standards strengthened beneficial ownership disclosure by encouraging a threshold of 10 percent (or lower) for disclosure, encouraging full disclosure of interests held directly or indirectly by PEPs, and capturing ownership and control of state-owned enterprises and public-listed companies.
  - Over 50 countries have committed to implementing the EITI standards (as of 2024).
- Implementation challenges:
  - Lack of requirement to capture end-investors in public listed companies.
  - Data quality, accessibility, and confidentiality issues persist; collected beneficial ownership information is often held confidential with limited or no public access.
- FATF compliance context:
  - About 30 percent of countries that underwent a mutual evaluation achieved some level of technical compliance with FATF beneficial ownership recommendations (“compliant” or “largely compliant”).
  - Over 90 percent of the countries received unsatisfactory ratings in terms of effectiveness (“low or moderate level of effectiveness”).
  - One hundred and sixty-four mutual evaluation reports (MERs) assessed countries against the 2012 FATF recommendations: from the 164 MERs: 78 had a “Low” rating in IO.5; 72 had a “moderate” rating in IO.5; only 14 countries had a “substantial” level of effectiveness.
- FATF multi-pronged approach requirement (Revision to R.24, March 2022):
  - Countries must ensure beneficial ownership information is available from three sources:
    1. Companies themselves;
    2. A public authority or body that hold a registry, or alternative mechanism;
    3. Supplementary sources of information (such as through the customer due diligence process) commensurate to the risks faced.
  - Nearly 100 jurisdictions have approved laws and established central registries of beneficial ownership information for legal persons and trusts.
  - The European Union mandated adoption of beneficial ownership registries since 2015.
- OECD Global Forum:
  - The OECD Global Forum brings 171 countries and jurisdictions together.

### Implementation mechanics and operational guidance
- Legal and regulatory reform:
  - Sectoral beneficial ownership requirements often require legal reforms, typically via sector-specific regulations; secondary legislation (regulations or circulars) can be used for rapid implementation.
  - Sectoral authorities should prioritize using the AML/CFT definition of beneficial ownership, when available; align sectoral measures as closely as possible to FATF standards when AML/CFT definitions fall short.
- Standardization and data fields:
  - Typical template fields include full name, date of birth, ID number (or tax ID number), nationality, an address, and the nature of ownership or control.
- Verification mechanisms:
  - Verification is critical; common approaches include prima facie checks, requiring source documentation where feasible, automation to flag errors, involvement of regulated intermediaries (banks, conveyancers, notaries), and crowdsourcing/publication to enable ex post verification by CSOs and journalists.
  - Self-declarations simplify implementation but are insufficient alone; procurement legislation should include truthfulness assertions and sanctions for false reporting.
  - Early experience with self-reported central registries indicates rampant false reporting without verification.
- Balancing transparency and privacy:
  - Publication supports monitoring and verification but raises security and privacy risks (e.g., extortion, violence, intimidation).
  - Approaches include publishing a sanitized subset of fields, case-by-case exemptions where publication poses disproportionate risks, tiered access mechanisms, and targeted publication (e.g., excluding residential properties while including commercial/industrial/agricultural/cultural properties).
  - Example practice: EU AMLD5/EU Court of Justice developments and Directive (EU) 2024/1640—AMLD6 define legitimate interest access (including journalists, CSOs, and third-country competent authorities).
- Sanctions and enforcement:
  - Sanctions should be effective, dissuasive, and proportional: fines, administrative and criminal penalties, debarment, confiscation, cancellation of procurement contracts.
  - Debarment and cancellation should extend to beneficial owners to prevent circumvention.
  - Enforcement must include internal controls to reduce misuse by procurement officials and transparent publication of enforcement actions where appropriate.
- Monitoring lifecycle:
  - Lifecycle steps: 1. Risk Assessment; 2. Legal/Regulatory Adjustment; 3. Data Collection; 4. Verification; 5. Publication & Access; 6. Enforcement; 7. Feedback Loop.

### Key lessons and policy recommendations (summarized)
- Sectoral approaches are feasible and impactful, even in low-capacity settings and under time constraints.
- Sectoral approaches should be:
  - Tailored, risk-based, and complementary to centralized registries;
  - Founded on clear legal frameworks and proportional disclosure obligations;
  - Supported by meaningful access for relevant stakeholders and adequate enforcement mechanisms;
  - Paired with guidance, training, FAQs, hotlines, and outreach to build stakeholder capacity.
- Verification and enforcement are essential; publication without verification risks poor data quality and false reassurance.
- Sectoral pilots can inform broader national frameworks and serve as entry points for jurisdictions with limited capacity.
- Targeted transparency could be extended to other high-risk sectors such as extractive industries, ownership of banks and related party lending, and precious metals and stones; applications may also be considered in insolvency and non-criminal-related areas (e.g., banks’ lending and debt transparency).

*Source: https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025181-source-pdf.pdf*

### CONCLUSION ____________________________________________________________________________________ 40

### CONCLUSION

### Introduction and purpose
- Beneficial ownership identifies "the natural person who ultimately owns or controls a legal person" and supports efforts to fight money laundering (ML), tax evasion, terrorist financing (TF), corruption, asset recovery, detection of fraud and administrative violations, protection of the environment, and mitigation of climate change.
- Despite international advances, domestic implementation of beneficial ownership transparency faces setbacks: data privacy and protection rules, weaknesses in completeness and quality of information, access, and effective sharing of information.

### Rationale for a sectoral approach
- The "sectoral" approach to beneficial ownership refers to tailoring the collection, access, and use of beneficial ownership information to specific risks in economic sectors (e.g., ML/TF, corruption, organized crime, tax evasion, environmental crimes, national security, enforcement of sanctions).
- Sectoral approaches focus on beneficial ownership information from any relevant type of legal entity or arrangement that best serves the specific sector and its risks.
- The sectoral approach:
  - Differs from the AML/CFT registry approach and does not replace or address AML/CFT beneficial ownership requirements.
  - Does not have the ultimate purpose of compliance with international standards such as the AML/CFT FATF standard.
  - Can take different forms and does not necessarily entail a registry; forms depend on the sector, risks, and country capacity and beneficial ownership infrastructure.

### Gaps between AML/CFT registries and sectoral needs
- Even when stakeholders (e.g., anti-corruption offices) are granted access to an AML/CFT beneficial ownership registry, sector-specific needs may remain unmet because:
  - A high-risk sector may need lower thresholds for ownership or coverage of individuals who financed the acquisition of an asset.
  - Additional details may be required (e.g., nationality and place of birth of the beneficial owner for enforcement of sanctions or protection of sensitive technology).
  - Supervisors may need information covering trusts or information searchable by real estate address.
  - Administrative agencies managing financial disclosures by public officials may lack access to non-public beneficial ownership information.
- Therefore, AML/CFT registries may not cover each sector’s needs at once.

### International standards and complementarities
- The FATF AML/CFT standard aims to prevent misuse of legal persons and arrangements for ML or TF and supports efforts to prevent and detect other offenses.
- In March 2022, the FATF standard was updated to require a multi-pronged approach for obtaining and holding beneficial ownership information and to ensure it is adequate, accurate, and up-to-date and available to competent authorities in a timely manner at both domestic and international levels.
- Under the new multi-pronged approach, countries need to ensure beneficial ownership information is available from different sources and mechanisms, including information held by a public authority or body (for instance, a registry).
- The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes provides standards for EOIR and AEOI. The EOIR standard requires that information that is "foreseeably relevant" for tax purposes (such as the identity of the legal and beneficial owners of assets, companies, and accounts) be available and accessible to tax authorities.
- The AEOI standard is considered the most comprehensive cross-border exchange mechanism on beneficial ownership information for foreign financial accounts.
- The EOIR and AEOI standards leverage extensively the information collected under the AML framework, including beneficial ownership information as defined under the FATF Recommendations.

### Practical evidence and replication potential
- Experience from beneficial ownership transparency in public procurement contracts during the COVID-19 pandemic Fund emergency financing shows:
  - A significant number of countries receiving Fund emergency financing were able to develop legal and institutional foundations and collect and publish beneficial ownership information for entities involved in COVID-19-related public procurement.
  - This suggests that sectoral approaches may be replicable in other high-risk sectors such as real estate, even under low resources or time constraints.

### Key factual points and figures preserved from the source
- March 2022: date of FATF standard update requiring a multi-pronged approach.
- The OECD Global Forum brings 171 countries and jurisdictions together.

*Source: https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025181-source-pdf.pdf*

### Box 1. The Extractive Industries Transparency Initiative Standards (EITI) and Beneficial Ownership

### Box 1. The Extractive Industries Transparency Initiative Standards (EITI) and Beneficial Ownership

### EITI beneficial ownership requirements and reforms
- EITI requires publicly available beneficial ownership registries for corporate entities that apply for or hold an interest in oil, gas, and mineral resources (EITI requirement 2.5).
- The EITI envisages a broad approach to the definition of beneficial ownership—requiring multistakeholder groups within the country to agree on an appropriate definition (including applying an ownership threshold, which can lead to variances between country approaches to beneficial ownership).
- Identified limitation: lack of a requirement to capture the end-investors in public listed companies.
- 2023 EITI standards strengthened beneficial ownership disclosure:
  - Encourage countries to adopt a threshold of 10 percent (or lower) for disclosure of beneficial ownership information.
  - Encourage full disclosure of interests held directly or indirectly by PEPs.
  - Capture ownership and control of state-owned enterprises and public-listed companies.
- Implementation status:
  - Action underway in participating countries to implement EITI beneficial ownership transparency requirements.
  - Over 50 countries have committed to implementing the EITI standards (as of 2024).
  - Several participating countries are undertaking legal reform to include beneficial ownership, and some are developing registers for beneficial ownership information.
- Ongoing shortcomings identified by the EITI stock take (2024):
  - Progress in establishing legal frameworks and thresholds for reporting.
  - Persistent challenges related to reporting obligations for PEPs and the development of comprehensive and reliable public registers.

### Data quality, accessibility, and practical challenges
- Accuracy and accessibility of beneficial ownership information continue to pose challenges.
- Experience indicates low quality of collected data hampers use by civil society and journalists.
- Collected beneficial ownership information is often held confidential with limited or no public access.
- The EITI 2024 stock take revealed challenges in developing comprehensive and reliable public registers and PEP reporting obligations.

### FATF standards, compliance, and the multi-pronged approach
- Progress toward the FATF AML/CFT standard has generally been limited and focused on technical compliance.
- Compliance statistics referenced:
  - About 30 percent of countries that underwent a mutual evaluation achieved some level of technical compliance with FATF beneficial ownership recommendations (“compliant” or “largely compliant”).
  - Over 90 percent of the countries received unsatisfactory ratings in terms of effectiveness (“low or moderate level of effectiveness”).
  - One hundred and sixty-four mutual evaluation reports (MERs) assessed countries against the 2012 FATF recommendations.
    - From the 164 MERs: 78 had a “Low” rating in IO.5; 72 had a “moderate” rating in IO.5; only 14 countries had a “substantial” level of effectiveness.
- Common implementation challenges:
  - Untangling complex ownership and control structures.
  - Establishing ownership thresholds (e.g., 10 percent or 25 percent shareholdings) which may prevent identification of all beneficial owners.
  - Privacy and legal privilege rules, undisclosed nominee arrangements, use of family members and strawmen.
- FATF multi-pronged approach (Revision to R.24, March 2022):
  - Countries must ensure beneficial ownership information is available from three sources:
    1. Companies themselves;
    2. A public authority or body that hold a registry, or alternative mechanism;
    3. Supplementary sources of information (such as through the customer due diligence process) commensurate to the risks faced.
  - Registries aim to be a “one-stop shop” for competent authorities to access information rapidly and efficiently.
  - Nearly 100 jurisdictions have approved laws and established central registries of beneficial ownership information for legal persons and trusts.
  - The European Union mandated adoption of beneficial ownership registries since 2015.

### Box 2 — Beneficial ownership registries: purpose, forms, and implementation challenges
- Common purpose and characteristics:
  - Registries may be placed under tax authority, FIU, or companies’ register; federal countries may have sub-national registries that interconnect; different registries may exist for different legal person types.
  - Registries may be integrated into existing databases or be standalone.
  - Well-functioning registries require timely updating, domestic and international information sharing upon request, and penalties for non-provision or inaccuracy.
- Implementation challenges:
  - Legal framework impediments to creating a registry.
  - Insufficient human and capital resources.
  - Limited capacity to enforce reporting requirements and apply proportional and dissuasive sanctions.
  - Limited capacity to verify adequacy and accuracy of beneficial ownership information and ensure regular updates.
  - Fragmented collection can create consistency issues, interoperability problems, and duplication of efforts.
  - Effective implementation in practice may take years.
- Access considerations:
  - AML/CFT standards require, at a minimum, access to beneficial ownership information by “AML/CFT competent authorities” (e.g., judicial authorities, law enforcement authorities, FIUs, supervisory authorities).
  - Access is often granted to private sector entities subject to AML/CFT obligations (financial institutions and DNFBPs).
  - Under the OECD Global Forum, access is focused on entities and authorities involved in combating tax evasion and other illicit activities.
  - Some countries grant access to journalists and CSOs, enabling discrepancy reporting and data quality improvements.
  - Some countries opt for public access to beneficial ownership information similar to legal ownership information.
  - Cross-border access for non-public registries depends on frameworks and may require international agreements or mutual legal assistance.

### Box 3 — Privacy rules, EU Court of Justice ruling, and public access trade-offs
- Background:
  - EU AMLD4 (2015) required member states to adopt central beneficial ownership registries.
  - AMLD5 (amended 2018) mandated EU member states to provide public access to beneficial ownership information for legal entities incorporated in the EU.
- EU Court of Justice ruling (November 22, 2022):
  - Annulled the public access requirement, stating general public access to beneficial ownership information interferes with the right to respect for private and family life and personal data protection under the EU Charter of Fundamental Rights.
  - The Court emphasized balancing the seriousness of that interference against the objective of preventing ML/TF.
  - The Court explicitly mentioned that journalists and CSOs connected to prevention and curbing of ML have a legitimate interest in accessing beneficial ownership information.
- Subsequent developments:
  - Some EU countries maintained open registries despite the ruling.
  - Directive (EU) 2024/1640—AMLD6—contains provisions concerning beneficial ownership registries and defines how persons with legitimate interest can access beneficial ownership information. Persons deemed to have a legitimate interest include journalists, CSOs, and third-country competent authorities.
- Benefits and trade-offs of public access:
  - Supports customer due diligence by financial and non-financial institutions.
  - Enables public monitoring and analysis of government spending and verification of officials’ financial disclosures.
  - Helps verify accuracy and timeliness of registry information.
  - Balancing transparency and privacy: provide enough information to identify beneficial owners without unnecessary details; establish case-by-case exemptions (e.g., evidence of a serious risk of violence or intimidation).
  - No universal formula exists; international standards and good practices can guide managing trade-offs.

### Definition: Sectoral approach to beneficial ownership
- For this paper, “sectoral approach” means tailoring the collection, access, and use of beneficial ownership information to specific risks in economic sectors.
- High-risk sectors are those most prone or vulnerable to abuse (such as procurement, real estate, and extractives).
- High-risk sectors may differ among countries and change over time.
- High-risk sectors may be identified via ML/TF national risks assessments or sectoral risk assessments.

*Source: IMF Working Paper — Box 1. The Extractive Industries Transparency Initiative Standards (EITI) and Beneficial Ownership (staff compilation from the provided content).*

### Box 4. Toward a definition of sectoral approach to beneficial ownership

### Box 4. Toward a definition of sectoral approach to beneficial ownership

### Definition and purpose
- The sectoral approach to beneficial ownership is a targeted and risk-based framework designed to tailor the collection, verification, access, and use of beneficial ownership information to address specific vulnerabilities in high-risk sectors, such as procurement and real estate.
- Focus: mitigate sector-specific risks (corruption, ML, and conflicts of interest) through customized mechanisms aligned with the unique characteristics of each sector.
- Flexibility: varying degrees of implementation, from basic data collection in sectoral transactions to advanced verification mechanisms.
- Complementarity: sectoral efforts are intended to be complementary to centralized national initiatives and not to replace them.

### Design principles and implementation considerations
- Tailor to country risk and context, mindful of implementation capacity, costs, and benefits.
- Minimum objective: ensure availability and use of beneficial ownership information in high-risk sectors when not available from other sources, or not with necessary details or formats.
- Minimize burden: consider sector burden so that implementation and compliance costs do not offset targeted benefits.
- Leverage existing capacity to guide design and limit burden on sector and authorities.
- Use of technology: increased use of technology can help limit costs associated with data collection, analysis and dissemination.
- Low-technology options: countries may choose to add a beneficial ownership field in existing sectoral forms, publish a list of beneficial owners, or maintain a simple registry (database with search and query functions).
- Simple publication options: sharing collected beneficial ownership information in a simple Excel file on a country’s procurement portal, a newly created sub-page, or the website of a real estate regulator.

### Centralized vs Sectoral approach (core distinctions)
- Centralized Approach
  - Combat ML/TF; comply with FATF standards
  - All legal entities and arrangements
  - AML/CFT competent authorities (sometimes public)
  - Formal verification via registry cross-checks
- Sectoral Approach
  - Address sector-specific risks (corruption, ML)
  - Tailored to high-risk sectors (procurement, real estate, extractive)
  - Sector stakeholders + AML/CFT authorities
  - May include crowdsourcing, intermediary checks

### Complementarity and scope
- Sectoral approaches can:
  - Complement other sectoral approaches and AML/CFT beneficial ownership efforts at any development stage.
  - Offer lessons for countries yet to implement centralized registries; serve as pilots for policies such as public access, objections to registered information, or verification processes requiring an “authorized person” to document accuracy.
- Not a staged substitute: sectoral collection is not advocated as a building block to create a centralized AML/CFT beneficial ownership registry; instead, it is a complementary source for verification, discrepancy reporting, and coordination with centralized efforts.
- Example: Extractive disclosure regimes (e.g., for EITI compliance) may apply definitions or scopes different from FATF and may require no-threshold approaches when a PEP is involved.

### Benefits for oversight, investigations, and public accountability
- Supports improved oversight, accountability, and sustainable governance in critical economic sectors.
- Enhances FIU operations and criminal investigations:
  - Sectoral publication can help FIUs gather financial intelligence, develop sectoral ML/TF typologies, check red flags related to financial transactions (e.g., in real estate), and search for prior suspicious transaction reports.
  - Reduces time-consuming information-sharing requests and accelerates internal investigations and detection of cross-border flows or typologies.
  - Supports law enforcement investigations, prosecution, and enforcement of ML/TF- and corruption-related cases in high-risk sectors.
- Fosters public accountability:
  - Publication enables investigative journalists, CSOs, researchers, and the public to detect conflicts of interest, collusion, misuse, or broader corruption.
  - CSOs and journalists can develop tracking databases and publicize suspicious findings, supporting early action and policy countermeasures.
  - Should be paired with whistleblower protection regimes to encourage reporting.

### IMF sectoral experiences — Procurement during COVID-19
- IMF emergency financing commitments:
  - The Fund sought specific commitments on governance measures for 73 countries receiving emergency financing, including measures related to beneficial ownership.
  - The most frequent commitment among countries receiving emergency financing was the targeted audit of emergency spending in 76 percent of requests.
  - Commitment to publish beneficial ownership information of companies awarded public procurement contracts appeared in 60 percent of all requests.
- Implementation outcomes:
  - Three years after most governance measures were committed, implementation rate of measures for pandemic related spending reached 80–90 percent, on average.
  - Measures to publish beneficial ownership information of companies awarded pandemic-related contracts were implemented fully (60 percent) or substantially (around 30 percent), resulting in a combined implementation rate of 90 percent.
- Context and novelty:
  - Publishing beneficial ownership in procurement was a novel measure combining AML/CFT and procurement frameworks, historically not intersecting.
  - Publication provided retrospective oversight rather than ex ante vetting.
- Capacity observations:
  - For countries with FATF Mutual Evaluation Reports (MER), 79 percent of the countries that implemented the beneficial ownership and procurement commitments had been rated with “low” effectiveness toward beneficial ownership transparency; another 21 percent had been rated as “moderate”; none achieved “substantial” or “high”.
  - Despite low FATF effectiveness ratings, many countries implemented the sectoral approach in procurement during the pandemic, suggesting relatively achievable ad hoc sectoral implementation.
- International and national impacts:
  - FATF revised in 2022 to require countries, among others, to ensure that public authorities have access to beneficial ownership information of entities involved in public procurement.
  - Some countries extended pandemic-era procurement measures more broadly, e.g., Ecuador.

### Lessons learned from procurement implementation
- Sectoral approaches can be implemented quickly and flexibly, even in low-capacity settings and without lengthy IT investments.
- Training is essential for stakeholders unfamiliar with beneficial ownership: public officials, private sector, CSOs, and journalists.
- Publication alone is insufficient; verification mechanisms are necessary to ensure quality and accuracy of beneficial ownership data.
- Guidance, FAQs, hotlines, and clear indications of where to find beneficial ownership data help stakeholders monitor compliance.
- Civil society monitoring can reveal circumvention schemes (e.g., dividing projects to avoid requirements).
- Positive knock-on effects: successful implementation in one high-risk sector can create momentum toward broader beneficial ownership transparency.

### Real estate sector: risks and macro-relevance
- Real estate is frequently abused and commonly identified as exposed to high levels of ML risks:
  - According to a FATF report, 53 percent of countries rated ML/TF risks associated with the real estate sector as either high or medium-high.
- Macro and financial stability risks:
  - Anonymous purchases create opaque, high-risk exposures for banks and can lead to loan write-offs, liquidity pressures, reputational damage, and penalties for AML non-compliance.
  - Illicit flows in real estate inflate property prices, crowd out legitimate buyers, misallocate capital away from productive sectors, reduce tax effectiveness, and perpetuate housing inequality.
  - Cash purchases and lower oversight relative to other investments make real estate attractive for laundering proceeds of crime.
- Illustrative case:
  - A London property worth £11 million was seized by the U.K.'s National Crime Agency after being found purchased with proceeds of crime.

*Source: Box 4. Toward a definition of sectoral approach to beneficial ownership (wpiea2025181-source-pdf).*

### Box 5. Macroeconomic Distortions in High-Risk Sector—Real Estate

### Box 5. Macroeconomic Distortions in High-Risk Sector—Real Estate

### Recent examples and documented inflows
- Real estate markets in London, New York, Los Angeles, Vancouver, among others, experience significant inflows driven by domestic and foreign proceeds from corruption, tax evasion, drug trafficking, and other illicit activities.
- Examples and estimates:
  - Approximately £4.2 billion worth of properties in the London property market had been bought with suspicious wealth (2017 report).
  - More than $2.6 billion in suspicious funds invested in commercial real estate in 22 U.S. states over the last 20 years.
  - Up to $5 billion in criminal funds was laundered through Vancouver real estate in 2018 alone, contributing to an approximate five percent increase in house prices.
  - A 2016 leak from a Panamanian law firm exposed widespread use of offshore companies to hide assets, including real estate.

### Effects on residential markets, price distortions, and bubbles
- Mechanisms and impacts:
  - ML in residential real estate can cause price distortions and increases, pushing local buyers out of the market and triggering housing unaffordability.
  - “Ripple effects” in high-end real estate: illicit purchases of luxury units can price legitimate buyers into lower tiers, with effects cascading down the market.
  - Foreign investments from high corruption risk jurisdictions can flow to markets outside central prime property markets.
  - Readily available illicit money can inflate prices beyond economic fundamentals, encouraging speculative behavior and contributing to or reinforcing property bubbles.
- Supporting evidence:
  - A 2022 study suggests that ML from entrepreneurial crimes (such as drug crimes) can create an upward distortion in local housing price markets through increased demand.

### Use of complex structures and offshore entities
- Typology:
  - Abuse of complex structures and offshore entities is a common typology for integrating illicit proceeds into real estate.
  - Criminals, often aided by facilitators such as lawyers and corporate service providers, use networks of shell companies, trusts, and other structures to conceal ownership and frustrate seizure.
  - Anti-corruption and AML probes in various jurisdictions have illustrated the use of shell companies to acquire real estate.
- Contextual drivers:
  - The typology may become more popular in the wake of increasing restrictions on foreign property ownership.

### Weaknesses in AML/CFT preventive controls and oversight
- Implementation gaps:
  - FATF recommendations require real estate professionals to conduct customer due diligence on a risk-sensitive basis and report suspicious transactions, but application/implementation among DNFBPs is markedly and consistently lower than among financial institutions.
  - Limited effective oversight by governments of real estate professionals contributes to low effective implementation of FATF’s recommendations.
- Assessment findings:
  - According to FATF and FATF-style regional bodies’ country assessments, the specific FATF Recommendations related to AML/CFT measures by and AML/CFT oversight of non-financial sectors (including real estate practitioners) have the lowest level of implementation across all jurisdictions.
  - Between 2013 and 2022, less than 42 percent of 120 countries assessed received a passing rating for supervising the DNFBP sector.

### Beneficial ownership transparency as a targeted mitigation
- Rationale and minimum design:
  - Beneficial ownership transparency can complement existing risk mitigation to target the abuse of legal entities to funnel illicit proceeds into real estate.
  - No one-size-fits-all: jurisdictions can exercise flexibility based on risk exposure and resources.
  - Minimum measure: collection of beneficial ownership information of the buyer in real estate transfers when buyers are legal persons/arrangements, collected by the land or real estate authority at the time of transfer (or submitted to another specified authority) and made accessible to competent authorities.
  - Jurisdictions may require verification by the public authority or intermediaries (banks, real estate agents, lawyers), noting verification sophistication is constrained by intermediaries’ capacities and public authority resourcing.
  - Where verification mechanisms are weak, public access to whole or part of information (in line with domestic privacy frameworks) can allow crowd-sourced verification by the public to improve information quality.
  - Beneficial ownership information may be compiled in a “point of time” database or included in existing land registries.

### Jurisdictional examples of sectoral beneficial ownership measures
- Jurisdictions introducing sectoral measures:
  - 2020: British Columbia established a publicly available Land Ownership Transparency Registry through the Land Owner Transparency Act following a government report identifying beneficial ownership transparency as key to combat ML in real estate and related property price inflation.
  - 2022: United Kingdom established the Register of Overseas Entities as a public register of overseas entities seeking to buy, sell, or transfer property or land in the United Kingdom to combat integration of proceeds from organized crime in U.K. property markets.
- Observations:
  - Reforms indicate an emerging trend of leveraging beneficial ownership transparency to address ML risks in real estate, but effectiveness in reducing ML/TF risks remains to be seen as practice develops.

*Source: IMF Working Paper — Box 5. Macroeconomic Distortions in High-Risk Sector—Real Estate*

### 2. Adjusting the legal and regulatory framework and properly defining beneficial ownership

### 2. Adjusting the legal and regulatory framework and properly defining beneficial ownership

### Legal and regulatory reform for sectoral beneficial ownership requirements
- Introducing beneficial ownership information requirements in high-risk sectors often demands legal reforms, primarily through sector-specific regulations.
- Many countries revised their procurement frameworks to mandate the collection and publication of beneficial ownership information for COVID-related contracts.
- Ideally, amendments to primary laws provide a robust legislative foundation; when rapid implementation is necessary, secondary legislation (e.g., regulations or circulars) can be an effective alternative.
- Countries can leverage the rule-making authority of relevant agencies to adapt requirements efficiently.
- Sectoral legislation may not explicitly define beneficial ownership; ensuring consistency across frameworks is essential to prevent fragmented implementation.
- Sectoral authorities should prioritize using the AML/CFT definition of beneficial ownership, when available.
  - If the definition in the AML/CFT framework does not fully comply with the FATF standard, aligning sectoral measures as closely as possible to those standards is recommended.
  - Footnote: 77 — “We advise the FATF definition as it is the most comprehensive among the international standards, and the only one that is assessed with consequences for the country in case of insufficient compliance.”
- Example practice: procurement agencies where the beneficial ownership definition was in line with the FATF designed a specific form to be filled by bidding companies when implementing COVID-19 commitments on beneficial ownership (see footnote 78 for common template fields).

### Definitional and form-standardization practices
- Standardized submission forms clarified expectations and facilitated compliance by bidders.
- Typical template fields (as noted in footnote 78) commonly required:
  - full name of the natural person(s) that are beneficial owners
  - date of birth
  - ID number (or tax ID number)
  - nationality
  - an address to locate this person
  - the nature of their ownership or control

### Stakeholder awareness and training (Section 3)
- Sectoral authorities may lack familiarity with the beneficial ownership concept, requiring robust initial outreach and detailed guidance.
- Limited intersection between the AML/CFT and procurement frameworks led to confusion between legal ownership and beneficial ownership, the scope of measures for procurement purposes, and implementation.
- Common misunderstanding: procurement agencies assumed measures required them to implement AML/CFT legislation or proactively support AML/CFT efforts beyond procurement management; Fund staff clarified this was not necessary.
- Land registries and other sectoral actors are generally not AML/CFT stakeholders and may have limited awareness; involvement of regulated intermediaries (DNFBPs such as lawyers, notaries, real estate agents) can help collect beneficial ownership information consistently.
- Any new regulation in this area will likely require an initial period of detailed guidance, outreach, and training.

### Ensuring effective implementation — 4. Proportional disclosure requirements
- Requirements must be tailored based on the intended purpose and use of beneficial ownership information in the sector to mitigate sectoral risks without overburdening actors.
- Design choices include:
  - whether information is requested for all legal entities involved in transactions or only for those meeting specific criteria
  - whether information is required for all transactions/processes (e.g., all real estate purchases) or a sub-set deemed higher risk
- Examples of targeted scope during the pandemic:
  - limiting procurement measures to certain types of procurement contracts (e.g., certain goods and services pandemic-related, or based on amounts)
  - exempting entities below a specific threshold (example: contracts in the amount of $50,000 and below)
- Risks and mitigation:
  - Thresholds can create loopholes (e.g., “smurfing” by dividing projects to fall below thresholds).
  - Procurement agencies can group bidding submissions based on beneficial ownership to detect structuring, re-bidding under new names, or collusion schemes.
  - Design should avoid loopholes and include strategies for detection and enforcement.
- Practical implementation:
  - Reliance on self-declaration by entities participating in procurement simplified implementation and did not entail additional burdens or delays when aligned with information already submitted under AML/CFT frameworks or collected by corporate registries/beneficial ownership registries.
  - Note: there was no requirement or verification that the information self-declared to procurement agencies was identical to that submitted to banks or registries (see footnote 79 for list of reporting entities).

### Ensuring effective implementation — 5. Verification mechanisms
- Verification is key to ensure accuracy; countries face challenges in verifying beneficial ownership information at sectoral level.
- Common verification approaches and considerations:
  - Reliance on crowdsourcing (making information public to outsource verification to CSOs, journalists, bidding companies).
  - Publication enables whistleblowing and ex post facto verification by competent authorities where sectoral agencies lack capacity.
- Self-declarations:
  - Shift the burden to entities but are not sufficient by themselves.
  - Procurement legislation generally includes an obligation to submit truthful information throughout the procurement process; where absent, a truthfulness assertion can be added to submission forms.
  - Failure to comply should result in automatic disqualification from procurement and other applicable sanctions.
  - Early experience with self-reported central beneficial ownership registries indicates rampant false reporting without verification (see footnote 80 reference).
- Prima facie checks by sectoral agencies:
  - At minimum, ensure forms are filled and detect evident errors or red flags (examples: identified beneficial owner is another company; fictitious names like Mickey Mouse; beneficial owners more than 100 years old).
  - Where feasible, require copies or presentation of original source documentation for prima facie checks.
  - Automation and digital tools can standardize submission, flag errors, and enable basic checks.
- Monitoring and follow-up:
  - Early monitoring of submissions helps identify common factual errors (missing fields, unclear completion instructions) and informs outreach/training needs.
  - Follow-up helps determine if non-compliance stems from lack of enforcement, poor dissemination, or misunderstanding of the beneficial ownership concept.
- Supporting verification through discrepancy reporting:
  - Where beneficial ownership registries exist and are accessible, sectoral beneficial ownership information can cross-check registers and complement verification via discrepancy reporting.
  - Specific discrepancy reporting channels could be established for sectoral agencies, focusing on minimizing resource implications.
- Use of regulated intermediaries in real estate:
  - Involvement of intermediaries can allow stronger verification without increasing registrar resource burdens.
  - Example: U.K.’s Register of Overseas Entities relies on “conveyancers” or intermediaries to verify information; verification obligation under the Economic Crime (Transparency and Enforcement) Act 2022 differs from customer due diligence and is not subject to risk-based supervision (see footnote 81).
  - In civil law jurisdictions, notaries can collect and verify beneficial ownership at the time of recording land transfers and transmit verified information to property registries.
  - Tasking intermediaries requires they have requisite expertise, capacity, and integrity.

### Ensuring effective implementation — 6. Balancing transparency and privacy
- Public access to sectoral beneficial ownership information can support effectiveness (e.g., during COVID-19, publication of beneficial ownership data from procurement facilitated monitoring of contracts and spending).
- Publication practices:
  - Publishing names of directors, shareholders, partners, or only procurement contract information is insufficient because corrupt actors can obscure control via straw men, shell/front/shelf companies, or layered structures.
  - Procurement agencies often published beneficial ownership information (at least for awarded entities) together with procurement documentation on an accessible government website.
- Privacy and security concerns:
  - Publicizing beneficial ownership of real estate can compromise privacy and pose security risks (targeting for extortion, violence, intimidation).
  - These legitimate concerns must be addressed before providing public access to real estate beneficial ownership information.
  - Publication may be less controversial when data is already public elsewhere (e.g., commercial registry) or self-disclosed on social media.
- Approaches to balance transparency and privacy:
  - Provide enough information to identify beneficial owners without unnecessary sensitive details.
  - Establish case-by-case exemption procedures where publication would entail disproportionate risks (e.g., evidence of serious risk of violence or intimidation).
  - Publication may be limited to a subset of fields; example: EU’s AMLD 5 and EU countries that maintain public access restrict access to only the month and year of birth rather than full date.
  - Protection regimes and exemption requests (the EU AMLD allows beneficial owners to request withholding if they can prove a concrete risk).
- Tiered access mechanisms:
  - Minimum access: beneficial ownership information collected by land registries accessible to real estate actors and competent authorities (e.g., law enforcement) while a sanitized subset is provided to the public.
  - Sub-sectoral publication policy can, for example, exclude residential properties while including commercial/industrial/agricultural/cultural properties.
  - Publication supports transparency during transactions by enabling professional intermediaries and real estate actors to cross-reference information.
  - Note: real estate actors are not competent authorities and may not have access to centralized beneficial ownership registries to check customer identities.
- Publication content and timeliness:
  - Publication should consider stakeholders’ potential use; during Fund emergency financing, published procurement beneficial ownership information typically included a disclaimer that data were self-declared and not verified by the procuring agency, and provided contact details for relevant agencies (e.g., FIU, anticorruption agency, asset disclosure/conflict of interest agencies, supreme audit institutions) to receive whistleblower reports.
  - Timeliness: beneficial ownership information in procurement should ideally be published on a government website before awarding the contract or within a short period after granting the contract, depending on procurement legislation.
  - Regular publication is important; publications should include the date of submission and links to the specific executed contract(s) or processes.
  - When publication capacity is constrained, strike a balance between feasibility and procurement transparency objectives.

*IMF WORKING PAPERS — Targeted Transparency: Sectoral Approach to Beneficial Ownership in Procurement and Real Estate*

### 7. Monitoring, Enforcement, and Compliance

### 7. Monitoring, Enforcement, and Compliance

### Sanctions and deterrence mechanisms
- Effective, dissuasive, and proportional sanctions ensure that the requirements for submitting beneficial ownership information are robust.
- Procurement frameworks generally have built-in sanctions in case of non-submission of information or submission of false information that can be similarly applied to beneficial ownership requirements.
- For real estate, fraud or perjury crimes may apply if the information is collected via an official report or form.
- A wide scope of sanctions should be considered in proportion to the gravity of the offense, including:
  - fines,
  - administrative and criminal penalties,
  - debarment,
  - confiscation,
  - cancellation of procurement contract.
- Debarment and cancellation should include not just the company implicated but also the beneficial owner (e.g., prevent attempts by beneficial owners to circumvent debarment by establishing a new company).
- Any relevant existing sanctions in the procurement framework or in the criminal code of the country can be cross-referenced by the regulations.
- Consideration should be given to developing internal controls to prevent procurement officials from inappropriately sanctioning competent companies to create rent-seeking opportunities.
- The imposition of sanctions should be motivated and communicated in a swift and transparent manner.
- The procurement agency could consider publishing the names of the companies and beneficial owners that were banned from contracting with the government due to lack or false beneficial ownership information.

### Integration with procurement and verification lifecycles
- Monitoring, enforcement, and compliance form step 6 of the lifecycle of a sectoral beneficial ownership transparency approach as presented:
  1. Risk Assessment
  2. Legal/Regulatory Adjustment
  3. Data Collection
  4. Verification
  5. Publication & Access
  6. Enforcement
  7. Feedback Loop

### Policy design considerations and safeguards
- Sanctions should be proportional to the offense and include measures to address attempts to circumvent enforcement (e.g., including beneficial owners in debarment).
- Internal controls are important to reduce the risk that procurement officials misuse sanctioning powers for rent-seeking.
- Transparency around enforcement actions (including publication of banned companies and beneficial owners) supports swift and transparent imposition of sanctions.

### Conclusions on sectoral approaches and forward-looking guidance
- Experiences during the COVID-19 pandemic and subsequent Fund engagement demonstrate that sectoral approaches to beneficial ownership transparency are feasible and impactful.
- Tailoring transparency mechanisms to vulnerabilities of high-risk sectors such as procurement and real estate can close critical gaps that centralized AML/CFT registries may not address.
- Sectoral efforts can:
  - support broader financial integrity,
  - enhance institutional accountability,
  - reduce the risks of corruption, conflict of interest, and illicit financial flows.
- Sectoral approaches offer a pragmatic entry point for jurisdictions with limited capacity to begin addressing sectoral risks while building toward more comprehensive national frameworks.
- Sectoral approaches should be viewed as a strategic complement—not a substitute—to centralized registries.
- Success depends on:
  - clear legal frameworks,
  - proportional disclosure obligations,
  - meaningful access for relevant stakeholders,
  - adequate enforcement mechanisms.
- Ensuring synergy between sectoral and centralized efforts will maximize their combined impact on transparency and governance.
- Targeted sectoral initiatives can serve as agile, risk-based tools to address immediate vulnerabilities and build long-term resilience in the face of evolving financial crime threats.
- While the paper argues that further global efforts should focus on procurement and real estate, targeted transparency could be applied to other sectors at risk of criminal misuse such as:
  - extractive industries,
  - ownership of banks and related party lending,
  - precious metals and stones.
- The same sectoral approach could be considered for insolvency and other non-criminal-related areas (e.g., banks’ lending and debt transparency).

*Source: 7. Monitoring, Enforcement, and Compliance — IMF Working Paper "Targeted Transparency: Sectoral Approach to Beneficial Ownership in Procurement and Real Estate"*

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_Source: https://www.imf.org/-/media/files/publications/wp/2025/english/wpiea2025181-source-pdf.pdf_