What Do You Know About Your UBO?
On Friday last week the US Financial Crimes Enforcement Network issued Guidance on Obtaining and Retaining Beneficial Ownership Information.
The guidance was issued to help clarify existing information on Ultimate Beneficial Ownership. Understanding a complex structure is imperative if a company is to really address the risk posed by money laundering and terrorist financing. Reading between the lines one can assume that the guidance has been issued as businesses have not been effectively managing this area as well as could be expected.
This was highlighted recently in the US Senate Report: ‘Keeping Foreign Corruption Out of the US: Four Case Histories’. Teodoro Obiang, son of the President of Equatorial Guinea was one of the cases investigated in the report. He used a network of US lawyers, bankers, real estate and escrow agents. “The bank did not, however, take any action regarding Mr. Berger’s accounts, even though he was the president of Beautiful Vision, had opened both accounts, and had hidden from the bank that Mr. Obiang was the beneficial owner of the company.” Mr Berger was Teodoro Obiang’s lawyer. In this instance if the bank had investigated the beneficial ownership structure they would have uncovered the connections. The entire report catalogues weaknesses in the US AML / CFT regime.
The Fincen guidance outlines the importance of CDD procedures designed to effectively identify beneficial ownership. Such as ‘Determining whether the customer is acting as an agent for or on behalf of another …’ Any accounts that pose a heightened risk should have enhanced due diligence processes applied. Shell bank and correspondent accounts are once again in the spotlight for posing additional risks and should be handled accordingly. Who is behind the transactions? Who is behind the structure?
We should expect to see legislation on US Shell Companies requiring a person forming US corporations to disclose the names of beneficial owners of US corporations. Additionally real estate and escrow agents should not continue to be exempted from the Patriot Act.
The underlying issue is simple: Who are you doing business with?
Further information:
Topics: Ultimate Beneficial Owners
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Member Comments
Anonymous, 17 Mar 2010 14:12
I have noticed that sales people could be so desperate to record their sales that the compliance officer / MLRO's query regarding the UBO is seen as business prevention. I think compliance practitioners should endeavour to highlight the risk the company is taking by not identifying who they are doing business with. Hopefully this will increase the AML awareness within the organisation
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