AMLR and complex ownership structures
The Anti-Money Laundering Authority (AMLA) recently announced a public consultation on Draft RTS on Customer Due Diligence under Article 28(1) of Regulation (EU) 2024/1624.
Article 11(2) states that “…where the customer’s ownership and control structure contains more than one legal entity or legal arrangement, obliged entities shall take risk-sensitive measures to obtain and assess at least the following information…”.
Furthermore, Article 12 defines what constitutes a complex corporate structure and the actions such a structure should trigger.
A literal reading of Article 12 might suggest that assessing ownership complexity requires an individual to manually review every structure. In practice, however, obliged entities serving a vast number of business clients must rely on automated systems to make these determinations
As we shall see, the T-rank Ownership indicators is a perfect tool for determining corporate structure complexity.
The T-rank Ownership Indicators
The T-rank Ownership Indicators have been available for a few years. They are accessible via an API endpoint, within Shareholder Maps (by clicking an entity and selecting “More info”), and as a selectable section in the Report Generator.
These indicators provide several metrics regarding the size and complexity of a company’s ownership structure, including the number of legal entity shareholders, the number of natural person shareholders, and maximum height (depth). They are used by clients to, among other things, determine if automatic onboarding can be performed.
We are about to add new metrics to the indicators which will be included in our next release. Let’s look in detail at how these indicators can help you comply with Article 12 of the RTS.
“…obliged entities shall treat an
ownership and control structure as a complex corporate structure where there are three or
more layers between the customer and the beneficial owner and, in addition, more than one
of the following conditions is met:…”
The number of layers is available in the max_shareholder_distance metric.
(a) there is a legal arrangement or a similar legal entity such as a foundation in any of the layers;
Starting from the next release, the indicators will include a table listing all entity types in the ownership structure, along with the sum of integrated ownership and the number of entities for each type.
(b) the customer and any legal entities present at any of these layers are registered in
jurisdictions outside the EU;
Also starting from the next release, a table similar to the one above will be added. This will list the countries the legal entity owners belong to, along with the number of entities and the sum of integrated ownership. There will also be a specific table for natural person owners.
(c) there are nominee shareholders or nominee directors involved in the structure;
In our Moody’s version, this can be extracted from the entity type table mentioned in point (a) above.
(d) the structure obfuscates or diminishes transparency of ownership with no legitimate
economic rationale or justification.
This criterion is subjective; however, our existing metrics—which count i) significant owners involved in circular ownership and ii) owners with high voting power despite low ownership—are, in our opinion, well-suited to identify this.
Article 12(2) states that “In the case of complex corporate structures … obliged entities shall, where necessary to complement the measures undertaken pursuant to Article 11, obtain additional information, such as an organigram”.
T-rank shareholder maps can easily be downloaded via API, further enabling the automation of KYC processes.
As demonstrated in this article, the T-rank Ownership Indicators provide an effective, automated mechanism for fulfilling the corporate structure complexity assessment requirements laid down in Article 12 and Article 28(1) of Regulation (EU) 2024/1624.
Written by Svein Parnas – svein (at) trank.no