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Concealment of Beneficial Ownership

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Concealment of Beneficial Ownership Egmont Group of Financial Intelligence Units Concealment of Beneficial Ownership July 2018 The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard. For more information about the FATF, please visit www.fatf-gafi.org This document and/or any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. The goal of the Egmont Group of Financial Intelligence Units (Egmont Group) is to provide a forum for financial intelligence unites (FIUs) around the world to improve cooperation in the fight against money laundering and the financing of terrorism and to foster the implementation of domestic programs in this field. For more information about the Egmont Group, please visit the website: www.egmontgroup.org Citing reference: FATF – Egmont Group (2018), Concealment of Beneficial Ownership , FATF, Paris, France, www.fatf-gafi.org/publications/methodandtrends/documents/concealment-beneficial-ownership.html © 2018 FATF/OECD – Egmont Group of Financial Intelligence Units. All rights reserved. No reproduction or translation of this publication may be made without prior written permission. Applications for such permission, for all or part of this publication, should be made to the FATF Secretariat, 2 rue André Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: [email protected]) Photocredits coverphoto ©Thinkstock CONCEALMENT OF BENEFICIAL OWNERSHIP │1 TABLE OF CONTENTS ACRONYMS .......................................................................................................................................................... 3 EXECUTIVE SUMMARY .................................................................................................................................... 5 Specialist and professional intermediaries ........................................................................................................ 6 Anti-money laundering obligations and supervision ..................................................................................... 8 Issues for consideration ............................................................................................................................................. 9 INTRODUCTION .............................................................................................................................................. 11 METHODOLOGY ............................................................................................................................................. 13 Horizontal Study of Enforcement and Supervision ....................................................................................... 14 DEFINITION OF BENEFICIAL OWNER ..................................................................................................... 16 STRUCTURE OF THE REPORT .................................................................................................................... 18 SECTION 1 — MISUSE OF LEGAL PERSONS AND ARRANGEMENTS .............................................. 20 Legal persons ................................................................................................................................................................ 20 Legal arrangements .................................................................................................................................................... 23 SECTION 2 — TECHNIQUES USED TO OBSCURE BENEFICIAL OWNERSHIP .............................. 25 Generating complex ownership and control structures ............................................................................. 26 Using individuals and financial instruments to obscure the relationship between the beneficial owner and the asset .............................................................................................................................. 35 Falsifying activities ..................................................................................................................................................... 42 SECTION 3 — VULNERABILITIES OF PROFESSIONAL INTERMEDIARIES ................................... 46 Continuum of complicity .......................................................................................................................................... 48 OVERVIEW OF COMMONLY EXPLOITED INTERMEDIARIES ........................................................... 50 Legal Professionals ..................................................................................................................................................... 50 Accountants ................................................................................................................................................................... 52 Trust and Company Service Providers ............................................................................................................... 54 Other Intermediaries ................................................................................................................................................. 56 OVERVIEW OF VULNERABILITIES ........................................................................................................... 58 Establishing legal persons and arrangements ................................................................................................ 58 Establishing and selling shelf companies .......................................................................................................... 60 Directorship, trustee, virtual office, and mailbox services ......................................................................... 61 Facilitating transactions through trust accounts or client accounts ...................................................... 63 Facilitating the purchase or sale of real property.......................................................................................... 64 Client advocacy and brokerage services ............................................................................................................ 66 © 2018 | FATF– Egmont Group Report 2 │ CONCEALMENT OF BENEFICIAL OWNERSHIP Providing services to clients and intermediaries domiciled internationally ..................................... 68 Providing advice on tax compliance .................................................................................................................... 70 Legal professional privilege and client confidentiality................................................................................ 71 Limited AML/CFT obligations or insufficient awareness and compliance ......................................... 73 SECTION 4 — ENVIRONMENTAL VULNERABILITIES ......................................................................... 76 Jurisdictional vulnerabilities .................................................................................................................................. 76 Vulnerable business practices ............................................................................................................................... 82 SECTION 5 — CONCLUSIONS AND ISSUES FOR CONSIDERATION ................................................. 86 ANNEX A. REFERENCES ................................................................................................................................ 93 ANNEX B. HORIZONTAL STUDY: ENFORCEMENT AND SUPERVISION OF BENEFICIAL OWNERSHIP OBLIGATIONS ....................................................................................................................... 95 ANNEX C. CASE SUMMARIES..................................................................................................................... 110 ANNEX D. SOURCES OF INFORMATION AND TECHNIQUES TO DISCOVER BENEFICIAL OWNERSHIP .................................................................................................................................................. 172 Tools to identify potential efforts to obscure beneficial ownership ................................................... 176 Techniques to identify potential efforts to obscure beneficial ownership ...................................... 178 Additional resources ............................................................................................................................................... 180 ANNEX E. INDICATORS OF CONCEALED BENEFICIAL OWNERSHIP ............................................ 181 Indicators about the client or customer ......................................................................................................... 181 Indicators of shell companies ............................................................................................................................. 184 Indicators about the transaction ....................................................................................................................... 185 © 2018 | FATF– Egmont Group Report CONCEALMENT OF BENEFICIAL OWNERSHIP │3 ACRONYMS ACRA Singapore Accounting and Corporate Regulatory Authority AEOI Automatic Exchange of Information for Tax Purposes
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