The Fraud Examiner
Shining a Light on Shell Companies: How Countries are Changing Beneficial Ownership Requirements
Anti-Money Laundering Campaign Leader, Global Witness
You don’t have to go further than turning on your flat-screen TV to know that crime and corruption are constantly in the news and focal points for TV entertainment. However, what’s less understood by the general public, but well known to investigators,
is that the most mundane details of a case are often the most important ones.
One of these obscure elements is now in the spotlight: anonymous shell companies, and the role they play in enabling money laundering and illicit activities. Whether it’s the
Panama Papers leak in 2016, the massive
Brazilian Car Wash scandal, the
Russian laundromat, or a growing collection of news articles involving luxury real estate purchased by shadowy figures, the role that anonymous shell companies can play in nearly every crime that generates money is being revealed.
Shell companies provide anonymity in a few different ways. First, in most jurisdictions, a person forming a company is not required to disclose the fact that they own the company. The jurisdiction may require the name of an agent, the number of shares that make up the company or an address where they can process service
requests, but that is often the extent of the disclosure. As such, simply by omitting the name of the real owner, companies can be formed with no record of who truly controls and benefits from that company — that is, those individuals known as the beneficial owner or owners.
In other cases, where the names of a company employee or director are disclosed, bad actors can easily skirt or exploit this requirement by identifying a nominee director or manager — someone who purportedly has knowledge of or control of the company but in
reality knows very little or is paid to not know. Finally, certain jurisdictions allow individuals to set up companies and agree to keep that information secret and difficult to access.
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