Misuse of Corporate Vehicles (Mr Richard Gordon , Financial Markets Integrity Department)


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Misuse of Corporate Vehicles (Mr Richard Gordon , Financial Markets Integrity Department)

  1. 1. The Misuse of Corporate Vehicles Project The role of registries in finding the elusive beneficial owner Corporate Registers Forum 2011 10 May 2011
  2. 2. The issue: Beneficial Ownership 2 Who is the beneficial owner (BO)?  Natural person who ultimately owns or controls a corporate vehicle (CV) or legal entity, e.g. company, foundation, trust What’s the problem?  Obstacle to investigators: Establishing true ownership/ control of proceeds of corruption moved through/ concealed by legal entities The Misuse of Corporate Vehicles Project  How legal entities are used to conceal the interest of a corrupt official in the proceeds of corruption  Database of 150 Grand Corruption Cases  Registry Project in 40 Jurisdictions  Identify solutions - role registries and service providers could play in gathering information on beneficial owners
  3. 3. The Registry Project 3 Project  Assessing registries’ role in providing information on legal entities and collecting beneficial ownership  To do this, answer 4 questions - What information is collected? - Is that information verified for accuracy? - Is that information updated? - Is that information accessible in a timely manner? Method  40 countries: legislative assessment as database  Country report on findings sent to registries  Brief questionnaire on day-to-day practices and challenges
  4. 4. Key Findings 4
  5. 5. General Findings 5 Registries do not have AML objective Starting point for law enforcement; cross checking tool for banks- easiest to access Most registries are passive in nature Amount of information varies Do not cover unincorporated entities such as trusts Only Jersey requires the BO to be identified and recorded by a government body Almost all registries record relevant information on entities, enhancing the utility of the registry in possibly providing leads to the beneficial owner.
  6. 6. What information is collected? 6
  7. 7. Is information verified for accuracy andupdated? 7
  8. 8. Is information verified for accuracy and updated? 8 Capacity and resources  Beneficial ownership in the registry = significant change in approach and funding to ensure accuracy, enforcement of compliance, and correct identification of the beneficial owner  Financial constraints are already of major concern to most
  9. 9. The Jersey model: Conditions under which registry can be an option for collecting beneficial ownership 9 Condition 1: The registry verifies information in some way Condition 2: The registry enforces compliance with registration and updating requirements when information changes Condition 3: The registry is knowledgeable on the concept of beneficial ownership and how to identify BO in a complex corporate structure; otherwise implement a simplified definition of beneficial owner (focusing on percentage shareholding or largest controlling interest)
  10. 10. 10 Is information accessible in a timely manner?•Preference forusing onlineregistrydatabases•Possible to havesearch criteria foreach type ofinformation theregistry collects
  11. 11. Is information accessible in a timely manner? 11 Access can and is being improved  improve efficiency in receiving and retrieving information  facilitate timely disclosure  allow for instantaneous incorporations Critical to role of registry in AML efforts Overall promotion of timelier access through innovative features  UK: disqualified directors search  Hong Kong: directors index  Singapore: information sharing & financial reporting
  12. 12. Lessons from Findings 12 Providing information  Not beneficial ownership, but other useful leads  Balance between integrity and cost  Online registries with multiple search criteria critical to role in AML efforts Collecting beneficial ownership  Change in approach and funding  Would need to verify information in some way  Enforces compliance with updating requirements  Knowledgeable on the concept of beneficial ownership and how to identify that person
  13. 13. Principal Recommendations 13
  14. 14. Registry Recommendation 1: Certain basic information should be maintained 14 Entity name • History of document filings Incorporation / formation / • Required annual returns registration date • PDF copies of filings and Entity type documents associated with the Entity status company (where feasible) Address of the principal place of business Address of the registered office and / or the name and address of the registered agent Information on directors or managers and officers
  15. 15. Registry Recommendation 2: Where feasible, encourage transition of registry from passive data receptors to more active components of countries’ AML regimes 15 More resources implementation of a robust on-going fact-checking component investigators would have access to higher quality data from the outset, as they currently often have to rely on outdated information
  16. 16. Registry Recommendation 3: Technological investments should be made in registry systems 16 Registry as an AML tool is directly tied to the extent to which is it planned and upgraded for that purpose o computerized > paper-based o online capable > closed network Desirable from both a business-friendliness and an AML perspective
  17. 17. Registry Recommendation 4: The ability to search a registry is most useful for AML purposes when certain universal inquiries are easily accomplished 17 by natural persons by first name or last name (which results in their related addresses, files, company positions (e.g. director), and details of those companies) by company secretary, registered office and/or agent by shareholders by addresses by business activity by country of registration by date of registration by date of incorporation
  18. 18. Registry Recommendation 5: Countries should assign unique identifiers to legal entities incorporated within their jurisdiction 18 Collection of evidence within the jurisdiction from different domestic agencies (e.g. tax, licensing, municipal authorities) Relevant to operational entities May be further applicable to all CVs with presence in the jurisdiction (including foreign corporate vehicles that may only have an operational connection or be administered from there)
  19. 19. Contact Information 19Task Team Leader of The StAR Misuse of Corporate Vehicles Project: Emile van der Does de Willebois Tel: +1.202.458.8679 Fax: +1.202.522.2433 Email: evanderdoes@worldbank.org