Trust and company service providers frequently play a role in limited liability companies which are seen to be used in building complex legal ownership structures, often involving shell companies. The use of nominee directors and shareholders, both formal and informal, exacerbates the risks by creating barriers between the owner or individual and laundered proceeds. Often, professional intermediaries play a role in helping create or operate the structures used to conceal beneficial ownership.

In my last article, I explored the indications of concealed beneficial ownership related to client behavior and involved legal entities. Here, I offer several indications further exploring legal entities as well as business records and related relationships including those pertaining to banks.

Indications include:

  • There is a discrepancy between the supposed wealth of the settlor and the object of the settlement.
    • Individuals, legal persons and / or legal arrangements:
    • make frequent payments to foreign professional intermediaries
    • are using multiple bank accounts without good reason
    • are using bank accounts in multiple international jurisdictions without good reason
    • appear focused on aggressive tax minimization strategies
    • are interested in foreign company formation, particularly in jurisdictions known to offer low-tax or secrecy incentives, without sufficient commercial explanation
    • demonstrate limited business acumen despite substantial interests in legal persons
    • ask for short-cuts or excessively quick transactions, even when it poses an unnecessary business risk or expense
    • appear uninterested in the structure of a company they are establishing
    • require introduction to financial institutions to help secure banking facilities
    • request the formation of complex company structures without sufficient business rationale
    • have not filed correct documents with the tax authority
    • provide falsified records or counterfeit documentation
    • are designated persons or groups
    • appear to engage multiple professionals in the same country to facilitate the same (or closely related) aspects of a transaction without a clear reason for doing so.
  • Individuals, legal persons and / or legal arrangements:
    • make frequent payments to foreign professional intermediaries
    • are using multiple bank accounts without good reason
    • are using bank accounts in multiple international jurisdictions without good reason
    • appear focused on aggressive tax minimization strategies
    • are interested in foreign company formation, particularly in jurisdictions known to offer low-tax or secrecy incentives, without sufficient commercial explanation
    • demonstrate limited business acumen despite substantial interests in legal persons
    • ask for short-cuts or excessively quick transactions, even when it poses an unnecessary business risk or expense
    • appear uninterested in the structure of a company they are establishing
    • require introduction to financial institutions to help secure banking facilities
    • request the formation of complex company structures without sufficient business rationale
    • have not filed correct documents with the tax authority
    • provide falsified records or counterfeit documentation
    • are designated persons or groups
    • appear to engage multiple professionals in the same country to facilitate the same (or closely related) aspects of a transaction without a clear reason for doing so.
  • Examination of business records indicate:
    • a discrepancy between purchase and sales invoices
    • double invoicing between jurisdictions
    • fabricated corporate ownership records
    • false invoices created for services not carried out
    • falsified paper trail
    • inflated asset sales between entities controlled by the same beneficial owner
    • agreements for nominee directors and shareholders
    • family members with no role or involvement in the running of the business are listed as beneficial owners of legal persons or arrangements
    • employees of professional intermediary firms acting as nominee directors and shareholders
    • the resignation and replacement of directors or key shareholders shortly after incorporation
    • the location of the business changes frequently without an apparent business justification
    • officials or board members change frequently without an appropriate rationale.
  • Complex corporate structures that do not appear to legitimately require that level of complexity or which do not make commercial sense.
  • Simple banking relationships are established using professional intermediaries.