Beneficial Ownership Transparency in Anti-Money Laundering
The goal of money laundering is to hide and legitimize illicit proceeds. In recent years,the Financial Action Task Force (FATF),the world's most influential inter-governmental body that establishes standards for global anti-money laundering and promotes policies to prevent money laundering,has given heed to increasingly sophisticated combinations of money laundering methods and techniques,such as the ever-increasing use of legal entities to disguise the true control and ownership of illegal funds. Financial criminals seek to maximize anonymity in financial transactions by facilitating the creation of shell companies whose owners and controllers remain largely unknown and obscured,thwarting criminal investigation and prosecution. Such misuse of legal persons posed a major risk of money laundering and efforts to unveil the true owners of corporations can be time-consuming and resource-intensive,especially when these ownership trails lead abroad or made of numerous layers. Government authorities investigating money laundering schemes will be less likely to establish the necessary links from the proceeds to the criminal. Financial investigations for tracing and stopping financial crimes have sometimes come up with the wall of opacity erected by the companies that are involved with criminals’ financial transaction. Money launderers use complex structures to avoid being detected – they hide their illegal proceeds to ensure that even if those funds are found,they cannot be traced to the real beneficial owner.
The less transparent the financial and corporate systems are,the less efficient and effective anti-money laundering regime become. Therefore,financial institutions and law enforcement have to provide ample time to determine the true ownership and control structure of the companies so as to prevent the unlawful use of legal persons by money launderers. In order to effectively deter and detect criminals of laundering the proceeds of crime under the cover of corporate vehicles,measures to improve ownership transparency are in urgent need. The following will explore the challenges of and the measures supposed to be taken to strengthen beneficial ownership transparency.
Anonymous Vehicles ¨C "Shell Companies"
Although shell companies may serve legitimate legal purposes,they have often involved with financial crimes such as money laundering. Almost always privately held,not publicly listed,shell companies may be used to obscure the real owners of the assets or the controlling parties behind the financial transactions. Shell companies,in which the real beneficial owner(s) cannot be easily identified,provide financial crimes with more convenience. Owners or controllers of shell companies,who often hide behind legal nominees,have access to financial services anonymously by acting through shell companies that enable illicit proceeds to circulate unobtrusively and criminals to conceal their nefarious activities conveniently. Such use of shell companies makes investigations exponentially more difficult and laborious since the burden of identifying real beneficial owners often handicap or delay investigations.