Table of Contents
Contents
Foreword
Acknowledgments
Abbreviations
Executive Summary
A Significant Challenge
The Elusive Beneficial Owner: A Call for a Substantive Approach
Wanted: A Government Strategy
The Advantages of Service Providers
Why Service Providers Should Be Obligated to Conduct Due Diligence
Enforcing Compliance
Attorneys and Claims of Attorney-Client Privilege
A Two-Track Approach
Why Due Diligence Is Not Enough
Enhancing the Skills and Capacity of Investigators
Transnational Investigations
Building a Transnational Case
Conducting Risk Analysis and Typologies
Part 1. The Misuse of Corporate Vehicles
1.1 Introduction
1.2 Objective of This Report
1.3 How to Use This Report
Part 2. The Beneficial Owner
2.1 Introduction
2.2 Origin of the Term “Beneficial Owner”
2.3 Defining Beneficial Ownership: The Theory
2.4 Applying the Concept of Beneficial Ownership in Practice
2.5 The Service Provider’s Perspective
2.6 Conclusion and Recommendations
Part 3. Where Does the Beneficial Owner Hide?
3.1 Introduction
3.2 Corporate Vehicles: Types and Features
3.3 Conclusion and Recommendations
Part 4. Finding the Beneficial Owner
4.1 Introduction
4.2 Company Registries
4.3 Trust and Company Service Providers
4.4 Financial Institutions
4.5 Conclusion and Recommendations
Appendix A. Compliance with Financial Action Task Force on Money Laundering (FATF) Recommendations 5, 12, 33, and 34
Texts of FATF Recommendation 5 and Recommendation 12
Texts of FATF Recommendation 33 and Recommendation 34
Appendix B. The Five Component Projects: Methodology and Summary of Findings
Project 1. The Grand Corruption Database Project
Project 2. The Bank Beneficial Ownership Project
Project 3. The Trust and Company Service Providers Project
Project 4. The Registry Project
Project 5. The Investigator Project
Appendix C. Short Description of Selected Corporate Vehicles
Legal Persons
General Partnerships
Limited Partnerships
Companies
Limited Liability Company
Foundations
Legal Arrangements
The Trust
Appendix D. Grand Corruption: 10 Case Studies
Case Study 1: Bruce Rappaport and IHI Debt Settlement
Case Study 2: Charles Warwick Reid
Case Study 3: Diepreye Alamieyeseigha
Case Study 4: Frederick Chiluba
Case Study 5: Jack Abramoff
Case Study 6: Joseph Estrada
Case Study 7: Saudi Arabian Fighter Deals and BAE Systems
Case Study 8: Pavel Lazarenko
Case Study 9: Piarco International Airport Scandal
Case Study 10: Telecommunications D’Haiti
Appendix E. An Overview of Corporate Vehicles in Selected Jurisdictions
Glossary
Boxes
2.1 The Origin of the Trust
2.2 Basic Attempt at a Concealment
3.1 Setting Up a Shell Company
3.2 Misusing a Shell Company
3.3 Using Shelf Companies to Conceal Ownership of Bank Accounts
3.4 A Typical Advertisement for “Shelf Corporations and Aged Corporations”
3.5 Laundering Money through a Front Company
3.6 Setting Up Companies with Bearer Instruments
3.7 Misusing a Bearer-Share Company
3.8 Misusing a Trust
3.9 Hiding the Proceeds of Corruption in a Charitable Foundation
3.10 Receiving Fraudulent Government Contracts by a Partnership
3.11 Laundering Money through a Sole Proprietorship
3.12 “Chaining” Corporate Vehicles to Conceal Beneficial Ownership
3.13 Developing a “Nose” for Inappropriate Complexity
3.14 Setting up Formal Nominee Arrangements for BCP Consolidated Enterprises (Nevada)
3.15 The Opacity Benefits of Using Nominees
3.16 Finding the Front Men: An Insider’s View
3.17 The Control of Corporate Vehicles by a Front Man
3.18 The Experience of the United States
4.1 The Jersey Model
4.2 Tracking Down Disqualified Directors: United Kingdom
4.3 The Directors Index: Hong Kong SAR, China
4.4 Information Sharing and Financial Reporting Systems: Singapore
4.5 Establishing a Legal Entity Involving More Than One TCSP
C.1 The Liechtenstein Anstalt
C.2 The Panamanian Foundation
C.3 The British Virgin Islands VISTA Trusts
Figures
3.1 Example of a Complex Legitimate Corporate Vehicle Structure
4.1 Types of Information on Corporate Vechicles Collected by Registries
4.2 The Balancing Act of the Corporate Registry
4.3 Extensive Online Search Facilities Publicly Available at the Company Register of Dubai International Financial Centre
4.4 Extensive Online Search Facilities Publicly Available at the ICRIS Cyber Search Centre in Hong Kong SAR, China
4.5 Types of Information Made Available Online by Registries
4.6 Requirement to Provide ID in Forming Companies (Sampled OECD Countries)
4.7 Requirement to Provide ID in Forming Companies (Other Countries)
4.8 Requirement to Provide ID in Forming Companies (Worldwide)
A.1 FATF Recommendation 5
A.2 FATF Recommendation 12
A.3 FATF Recommendation 33
A.4 FATF Recommendation 34
B.1 Questionnaire: Financial Institutions’ Rules on Beneficial Ownership and Their Implementation
B.2 Questionnaire: Investigator Project
C.1 Composition of Economic Activity Undertaken in the United States as Ascertained by Internal Revenue Service Tax Data
Tables
3.1 Two Examples in Which the Registration of Corporate Directors Is Addressed in Law
3.2 Examples in Which Nominees Are Addressed in Law
B.1 Grand Corruption Cases Database: Case Summary
B.2 Grand Corruption Cases Database: Corporate Vehicles
B.3 Grand Corruption Cases Database—Key Statistics
B.4 Complete Results of First Audit Study
B.5 Complete Results of Second Audit Study (noncompliant responses in italics)
B.6 Combined Results
E.1 Companies
E.2 Exempt/International Business Companies
E.3 Limited Liability Companies
E.4 Partnerships
E.5 Limited Partnerships
E.6 Trusts
E.7 Foundations
