Criminals employ a range of techniques and mechanisms to obscure their ownership and control of illicitly obtained assets. Identifying the true beneficial owner(s) or individual(s) exercising control represents a significant challenge for prosecutors, law enforcement agencies, and intelligence practitioners across the globe. – Egmont Group of Financial Intelligence Units.

The term “beneficial ownership,” describes someone who maintains ultimate control over an asset and enjoys the benefit without being the nominal owner of that asset. According to the Inter-American Development Bank (IADB) report, the specific definition of a beneficial owner of a legal entity are “always natural persons who ultimately own or control a legal entity or arrangement, such as a company, a trust, a foundation”.

The person whose name is formally registered as owner of an asset is not necessary the person who ultimately controls the funds. This is an important distinction because the focus of the investigation and anti-money laundering efforts should be on the ultimate owner who has the “control”. Investigating this person is a crucial step in identifying the source of wealth and global crackdown on fraud, corruption, money laundering and tax evasion.

Identifying beneficial owners has become increasingly important from a regulatory perspective. The Financial Action Task Force (“FATF”) is designed to establish global standards on money laundering and consistently raises expectations on beneficial ownership rules. For example, the US Financial Intelligence Unit, can now require the institutions to collate information on individuals who own more than 25% of a legal entity.

The Financial Action Task Force’s overall strategy is to increase the amount of information available on beneficial owners who carry out transactions through financial institutions globally. However, the most skilled and refined criminals are still able to take advantage of various corporate structure to conceal their beneficial ownership.

Corporate vehicles that hide beneficial ownership:

  • Shell Companies
  • Shelf Companies
  • Nominees
  • Fronts
  • Trusts
  • Charities and Non-profits

It is widely known that most sophisticated fraud investigations involve at least one shell or shelf company at some point in the process and that certain jurisdictions are popular locations to form the above structures. These jurisdictions often overlap with those labelled as “tax or secrecy havens.”

UBO investigation can be very difficult when conducting cross-border research. The starting point should be the corporate registry for a given jurisdiction, but the level of information that is available from such registries varies substantially between jurisdictions. The information can include details such as the company name, the name of the company formation agent, company directors or board members, and sometimes a physical address for the company.

Matrix focus is on identifying, retrieving and analysing all information that can provide leads:

  • about the individual’s asset holding structure, particularly with regard to off-shore and limited transparency jurisdictions;
  • that can be useful for development of human sources with knowledge of how a subject holds assets; and
  • who the ultimate beneficial owner is.

Corporate Registries – what can be retrieved by UBO investigation?

Each jurisdiction is different. An entire country may have a single registry, or numerous registries for various cities or districts. Therefore, the level of information that can be obtained changes significantly between jurisdictions.

According to the World Bank’s survey conducted globally the following information was usually available from the corporate registry:

  • The legal entity’s name and type
  • The date of the legal entity’s formation and dissolution
  • Articles of incorporation
  • A physical address
  • Details of the registered agent.

Some jurisdictions also have the following information in their corporate registries:

  • Names and addresses of the directors or officers
  • Names and addresses of the shareholders, members or other legal owners.;

The beneficial owner’s details are not collected or made public by too many corporate registries. However, in recent years, some jurisdictions have taken steps to apply registers of beneficial ownership:

  • United Kingdom
  • Latvia
  • Estonia
  • Denmark
  • Malta
  • Ireland
  • Luxembourg
  • Lithuania
  • Germany
  • British Virgin Island
  • Cayman Islands
  • Hong Kong
  • Singapore
  • Switzerland
  • Lichtenstein

Cyprus, the Netherlands, Hungary, Poland and Romania are in the process of adoption of national legislation of beneficial ownership registers and their implementation.

Despite this international progress, beneficial ownership information is still unavailable directly from the corporate registries of most jurisdictions, including the US.

Other UBO investigation difficulties of corporate registries is the fact that information in them can often be outdated and inaccurate. Many registries are not updated regularly, and most rely on the information provided by the person or company to provide correct information at the time of incorporation. So, once these tracks have been checked and analysed, the strategy may shift to external enquiries or human source intelligence (HUMINT).

In beneficial ownership investigations, Matrix can offer an in-depth local knowledge and experience to navigate through a given jurisdictions and we are able to focus the investigation to achieve the client’s ultimate objective.