AMLAnti-Terrorist FinancingKYCSanctions

Why does ultimate beneficial ownership matter?

By April 4, 2015 December 4th, 2019 No Comments

The joint-stock company is a social innovation that made possible global capitalism today. The array of corporate vehicles that it has spawned – limited liability corporations, trusts, limited companies and other legal structures – make possible the investment of capital and the concomitant sharing of risk. The profusion of different structures in varying jurisdictions makes for a competitive global marketplace in corporate structuring. However, these structures can be misused in order to hide the proceeds of crime and to facilitate financial crime. This can lead to the financing of terrorism, or the structuring of funds from predicate crimes.

Ultimate Beneficial Owner/Ultimate Beneficial Ownership is the term for the real parent entity of a company. The question we ask is, who actually controls the corporate vehicle? If the share capital is available on a register of members, and it is owned by an individual, then this is very easy to determine. However, if the share capital is owned by another vehicle in an off-shore location that does not disclose who the owner of the shares is, then it is not possible to determine who owns and therefore controls the company. The company could be controlled by a terrorist, a money-launderer, or a criminal.

Furthermore, ultimate beneficial ownership is important for reasons of bribery and corruption. It could be that the corporate vehicle has been created with the express purpose of funnelling funds from a corrupt state or government. This violates the law of the respective country, and is effectively the theft of money from taxpayers of that country.

Corporate ownership information is widely used for compliance research. You can take critical compliance data points from data sources and include them in your on-boarding systems, or integrate results into your proprietary risk based analysis mechanisms.

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