Beneficial Ownership Research Articles

THE DOCTRINE OF BENEFICIAL OWNERSHIP IN RUSSIAN LAW

The article deals with the problems of differentiation of the spheres of application of doctrine, the piercing corporate veils and the doctrine of beneficial ownership. Bothdoctrines are used to challenge corporate decisions. Challenging is possible if a person exercising corporate control has abused themor has lost the reality of its course.The article proposes solution of the problem when persons controlling a legal entity, thus structuring contractual relations, so as not to lose control over the company and in cases of introduction of bankruptcy procedures, and transfer of management by its creditor.The doctrine of beneficial ownership is applicable where the following conditions are met: the beneficiary makes a full disclosure of corporate information and details of the business structure; the complexity of the business structure is immaterial; the beneficiary has proved that he exercised corporate control over the company whose decision or transaction he is contesting, but has lost this control as a result of wrongdoing; the contested resolution of the company's general meeting isvoid (voidable); the beneficiary has acted in good faith; the beneficiary has motivation due to fear of financial losses, which he is certain to suffer unless the transaction or decision is contested; the doctrine is applied by way of exception.

Disclosure of information about the beneficial owner and the principle of transparency in corporate governance

The article considers the dynamics of the modern world, where globalization determines economic and financial relationships, the concept of "beneficial owner” becomes the key in the context of international financial structures. This topic is of considerable interest and debate as the identification of the true owner and user of financial resources becomes more difficult due to the development of diverse business models and financial instruments. At present, transparency of beneficial ownership is considered as a key aspect of policy in the fight against illegal financial flows, which include cross­border financial transactions aimed at money laundering, tax evasion; corruption and terrorist financing. Without transparency of beneficial ownership, criminals are able to participate in illegal activities, hiding it behind legal entities or nominal owners. Abuse of corporate secrets can be prevented by identifying, registering and disclosing information about individuals who exercise decisive influence or control over the activities of legal entities, such as companies, partnerships, trusts or similar legal entities. The issues of creating entities with a transparent ownership structure, reducing the level of corruption, disclosing the real owners of certain companies to society, preventing and counteracting the legalization of illegal income by officials of all levels continue to be a priority in Ukraine. In particular, countries in which legal entities may issue bearer shares or bearer warrants, or in which nominal shareholders or nominee directors may exist, should take effective measures to ensure that they are not used to launder funds or finance terrorism. This article examines the role of the beneficial owner in international financial structures, revealing the essence of the concept, its meaning and impact on financial processes. The study is aimed at revealing the key aspects related to the definition of the beneficial owner, its role in preventing aggressive tax planning, as well as in the context of compliance with international norms and standards in the field of financial transparency.

UBO Register after ECJ’s Preliminary Ruling

On the basis of EU law, each legal entity has one or more ultimate beneficial owners (UBOs). An UBO is always an individual. An individual having more than 25% of the shares, more than 25% of the voting rights more than 25% of the economic benefit or has control in a legal entity, qualifies as UBO. Every EU Member State has its own national UBO register for legal entities. These national UBO registers were open to the public. This article deals with the ruling of the Court of Justice of the European Union (ECJ) to prohibit unrestricted access to the UBO register to the public. EU Member States are obliged to amend national legislation accordingly. This article also provides an overview of the consequences of the ECJ’s ruling in France, Germany, Italy, the Netherlands, Portugal, Spain and the United Kingdom.

Improving the mechanism of beneficial owners identification to combat money laundering and terrorist financing

Subject. The article considers problems of strengthening the economic and information security, developing complex corporate structures in Russia. Objectives. The purpose is to develop proposals for distribution of responsibilities among government authorities for collection of information about beneficial ownership. Methods. The study draws on the systems analysis. Results. The paper offers measures to organize information exchange between legal entities, their beneficial owners, subjects of primary and State financial monitoring. It establishes the need to create a single register of beneficial owners. Conclusions. Improvement of beneficial ownership mechanism is possible by using the risk-based approach, which implies increased focus on complex corporate structures.

Compare the Beneficial Ownership Identification System from the Perspective of Anti-Money Laundering Between China and the UK

This study mainly focuses on the comparative study of the identification of beneficial owner system in anti-money laundering supervision of China and the UK. China scored poorly in The Financial Action Task Force's assessment of its anti-money laundering regime, which singled out major deficiencies in the system for identifying beneficial owners. Beneficial owner is an important concept in anti-money laundering regulation. The beneficial owner is, literally, the true beneficiary behind the company's various business practices. In today's very active economic activities, money laundering has always been the focus of law enforcement. At the same time, the complexity of corporate ownership structure and the diversity of money laundering forms have brought great obstacles to the supervision of money laundering. In such an environment, the identification and supervision of the actual beneficiaries behind the company can improve the efficiency of the supervision of money laundering. The UK received a high rating in The Financial Action Task Force's assessment and is considered to have set up an advanced anti-money laundering regulatory system internationally. Therefore, this study will find suggestions and directions for China's future institutional improvement by comparing the identification systems of beneficial owners in anti-money laundering supervision between China and the UK.

Ownership Beneath: Transparency of Land Ownership in Times of Economic Crime.

This article considers 'ownership beneath' in light of the Economic Crime (Transparency and Enforcement) Act 2022, which has introduced a new Schedule 4A into the Land Registration Act 2002. The legislation, with notable exceptions, requires overseas entities to publicly reveal their beneficial owners, with criminal and land law consequences if transparency requirements are not met. The article explores how ownership beneath operates and can be made more transparent, noting the three different forms of beneficial ownership employed: as control, behind a trust and as a consequence. Emphasising the distinctive nature of beneficial ownership of land, the analysis recommends amending ECTEA 2022 to focus on land ownership, not merely landowning overseas entities, facilitating greater transparency by expanding the definition of registrable beneficial owners, closing the loophole where information is not available and requiring public disclosure of most trust information.

The practical applicability of the concept of the beneficial owner in non-profit legal entities

This research is focussed on evaluating the practical applicability of the concept of the beneficial owner in a special type of legal persons—non-profit entities. Specifically, such legal persons as cooperative societies, political parties and alliances thereof, associations and foundations, as well as religious organisations and their institutions are examined. The aim of this research is to analyse the norms that prescribe the legal definition of the beneficial owner and methods of control exercised thereof with respect to non-profit entities and substantiate the necessity to improve these norms to have a larger public credibility of information registered in the public register. In order to achieve this aim, such research methods as doctrinal analysis of the relevant legal norms on beneficial owners of non-profit entities, as well as case studies to illustrate the current practice of registration of the beneficial owners are applied. The principal conclusion of this research is that non-profit entities are underregulated in the anti-money laundering (AML) field, and legal framework on their beneficial owners needs serious amendments to achieve accuracy, consistency and public credibility of the information that non-profit entities submit to the Register of Enterprises as regards their beneficial owners. Keywords: beneficial owners, non-profit entities, public register, Register of Enterprises, technical beneficial owner.

Evaluation of the anti-money laundering programs implementation in Indonesia

The term money laundering emerged in the early 19th century. Although various prevention and enforcement efforts have been developed since then, money laundering still occurs throughout the world. Therefore, it is necessary to carry out continuous evaluations to ensure that the applicable policies to curb money laundering remain adequate. This research aims to evaluate the effectiveness of anti-money launder-ing programs in Indonesia using the opportunity element approach in fraud models that are represented by the regulations, implementations, and supervisions. This research will evaluate: (1) the effectiveness of money laundering control, (2) banks levels of compliance, (3) the regulatory and supervisory body’s performance, and (4) the problems in implementation of the anti-money laundering program. This study uses a qualitative research method with an evaluation approach. This study obtained data from Indonesia’s Financial Service Authority, the Financial Intelligence Unit and the relevant banks as well as other relevant evaluations reports and indexes. The results of this study are that the implementation of the AML program in Indonesia is good but still needs improvement in its risk-based preventive measure and enforcement measures. The results of this research also shows that the identification of beneficial owner is one of the problems faced by banks.

Ongoing reporting obligations of a Cyprus International Trust

Abstract This article discusses the ongoing reporting obligations of a Cyprus International Trust in the context of evolving compliance requirements, particularly in relation to the latest European anti-money-laundering directives. It highlights the transposition of the 5th AMLD into Cyprus law and the recent European Court of Justice decision limiting public access to Ultimate Beneficial Owner (UBO) registers. The article also explores the laws governing regulated professionals and the disclosure of trust data in Cyprus; and further examines the Cyprus UBO register of express trusts and the limited access granted to the public, touching on the challenges that lie ahead.

Functioning of the register of beneficial owners: findings from Poland

PurposeThe implementation of the Directive 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing resulted in the enactment by the Polish Parliament of the Act of March 1, 2018, on the prevention of money laundering and terrorist financing. One of the most important issues identified in the Act was the establishment of the Central Register of Beneficial Owners. The purpose of this paper is to critically analyze the functioning of the Register in Poland from the perspective of three years since its establishment. The text presents the most important problems faced by reporting institutions and obliged entities due to discrepancies in the interpretation of the Act’s provisions – especially in terms of the definition of a beneficial owner.Design/methodology/approachThe basic research approach was a comparative content analysis method. The objects of analysis included Polish Laws, Directive of the European Parliament and the Council (EU) 2015/849 and the judgment of the Court of Justice of the European Union. The theoretical legislative assumptions contained in the Acts were compared with reports, studies and communications prepared by public and private institutions. This made it possible to draw conclusions regarding the causes of problems with the functioning of the Register in Poland.FindingsThe results of the research showed that the ambiguity of the definition of the beneficial owner leads to a number of problems on the part of reporting institutions, such as companies, foundations and associations. On the other hand, a large part of the data entered in the Register is questioned by obliged entities. The lack of personal data protection is also a problem. Consequently, this reduces the value of the Register as a tool that effectively mitigates the risk of money laundering.Research limitations/implicationsThe research focused only on the functioning of the Central Register of Beneficial Owners in Poland. The subject of the analysis addressed problems with the definition of beneficial owner, issues of data quality and openness and the process of verifying the Register’s data. The technical aspects of the Register operation and the financial penalties imposed by public oversight institutions were not reviewed. Also, no comparison was made with other European Union (EU) member states that have implemented Directive of the European Parliament and of the Council (EU) 2015/849.Originality/valueThis study discusses the important issue of regulatory requirements introduced under EU regulations for private companies. Familiarization of companies, NGOs and obliged entities with the conclusions of the study can positively influence the consolidation of the correct interpretative path. In addition, to the best of the author’s knowledge, this is the first scientific text that identifies and systematizes the most important problems of the Register’s functioning in Poland.

Unternehmen werden durch dasselbe EU-Recht in den Mitgliedstaaten sehr unterschiedlich belastet – hier am Beispiel des Transparenzregisters

Abstract In order to prevent money laundering and terrorist financing, the European Union has issued the so-called Anti-Money Laundering Directive, on the basis of which a transparency register has been set up in every EU member state. This register is identifying the beneficial owners of legal entities. This article is looking into the costs and bureaucratic burdens associated with registration for company requirements in France, Italy, Austria and Germany and the reasons for the sometimes considerable differences.

Критерии кондуитных компаний в российской концепции бенефициарной собственности

The article examines administrative practice of Russian tax authorities and courts to identify criteria of conduit companies. The authors propose their own classification of the criteria for identifying persons who are not beneficial owners of income, and distinguish two models of conduit companies, both having its own practical implications.

The Anticorruption Protocol to the United Nations Convention against Corruption Beneficial Owner Rule

To fight corruption, money laundering, and organized crime, a proposed APUNCAC Beneficial Owner Rule would require financial service personnel to obtain and submit certification by the true beneficial owner when covered funds are transacted in amounts exceeding USD 3000. The strategy would trap front men into false statements, create a transaction-level record of assertions by front men that can be tested by a prosecutor, eliminate loopholes that allow criminals to escape prosecution in offshore havens, not require proof of a predicate crime or the illicit nature of funds, trigger a chain of witness cooperation, fight organized crime using a domino strategy, and be accomplished via a relatively simple change in domestic laws. Analysis suggests (1) the required technology exists; (2) transaction friction would be minimal; and (3) that the implementation of the Rule is feasible and practical, both operationally and from a legal standpoint, suggesting that the proposed Rule offers a promising strategy to fight organized crime.

MONEY LAUNDERING FRAMEWORK FOR PROFESSIONAL ACCOUNTANTS: POST COVID-19

Background and Purpose: The Covid-19 pandemic has sparked global challenges, economic disruption, and an increase in related crimes, such as scams, fraud, and cybercrime. It has also changed the routines of individuals, businesses, and governments in combating financial crimes, especially professional accountants. As front-liners in the anti-money laundering (AML) regime, professional accountants play a vital role in combating financial crime, including money laundering activities that have risen during the pandemic. However, limited study has investigated the money laundering reporting framework for the professional accountants. Hence, this study aims to investigate the money laundering framework for professional accountants that suits the post-pandemic period.
 
 Methodology: This study conducted a content analysis, focussing on the current red flags for money laundering activities specifically for the professional accountants mentioned in prior literature and publicly available reports such as Financial Action Task Force (FATF), ICAEW and ACCA Global. Since this study focuses on the money laundering framework for the professional accountants, this study also referred to the MIA Competency Framework that highlights the importance of professional scepticism and professional judgement.
 
 Findings: Findings showed that professional accountants must exercise high professional scepticism and judgement when dealing with money laundering risk indicators related to related party transactions, beneficial ownership and e-commerce activities. This is to provide quality reporting to the authorities and to proceed with money laundering investigations.
 
 Contributions: This study will contribute to the regulators and professional accountant by proposing a money laundering framework for the professional accountants that would assist them in fulfilling their role as money laundering reporting entity.
 
 Keywords: Money laundering, professional accountants, professional scepticism, professional judgment, Covid-19 endemic.
 
 Cite as: Zolkaflil, S., Syed Mustapha Nazri, S. N. F., Mohd Razali, F., Ahmad Tarmizi, M., & Masum, M. H. (2023). Money laundering framework for professional accountants: Post Covid-19. Journal of Nusantara Studies, 8(TI), 235-256. http://dx.doi.org/10.24200/jonus.vol8issTIpp235-256

A Simulation Game for Anti-money Laundering (AML) Using Unity

With increasing demand of anti-money laundering (AML) regulation in Fintech, AML is one of the key factors in FinTech and its regulatory technologies (RegTech). Presently, as research and education on AML focus on financial institutions and authority, the individual is vulnerable to money laundering (ML) by being money mules with lack of awareness. Therefore, this paper illustrates the design of a 2-player simulation game for AML, which integrates the game-based learning model with plots including introduction stories, player actions and ending stories. In the game, a player role-plays either a money launderer or AML specialist. Within 6 in-game months, the former needs to perform ML with a target goal while the latter needs to identify the former’s actions and restrict him to achieve his goal.
 For actions of the money launderer, this paper integrates the criminal order with the PLI model (placement, layering and integration) to simulate the full ML circle. The criminal order provides return to the attacker if he completes it within the time limit. Each layer in the PLI model is expanded with middle processes for the methodology. The attacker uses shell companies to hide his identity and support each transaction for ML with apparently legitimate reasons.
 For actions of the AML specialist, this paper integrates the AML transaction monitoring with the Financial Action Task Force (FATF)’s Forty Recommendation. The defender needs to perform AML transaction monitoring with identifying suspicious financial activities based on money flow. Then, he needs to identify the actual beneficial owner of suspected companies with their share distributions. Both money flows and share distributions are visualized in data charts. Later, the defender shall report suspicious companies to the Financial Intelligence Unit (FIU), which will return the investigation result at the beginning of the next in-game month.

The corporate legal profession’s role in global corruption: obligations and opportunities for contributing to collective action

Key corruption issues, like lack of transparency in beneficial ownership and money laundering, are inherently transnational. They are facilitated by professional services, like corporate lawyers, who work with various standards, regulations, and global financial flows that can move the proceeds of crime across the world. This paper uses reflective equilibrium to analyze the tensions between the philosophical principles of complicity and collective responsibility and the principles found in the professional role of lawyers in society to reflect on the corporate legal profession’s role in enabling corruption. Furthermore, this paper explores how these tensions can be addressed and how lawyers can be situated in anti-corruption collective action theory and practical collective action initiatives. For example, the legal profession has a collective obligation to maintain and self-patrol the profession’s ethics, primarily through their regulating authorities, and it should be considered to what extent these authorities are promoting anti-corruption standards or reprimanding lawyers who are complicit in corrupt acts. There is also an opportunity for corporate lawyers to use their role in society to develop more collective action initiatives to address issues of transnational corruption, which may include enforcing a higher collective standard in providing advice or advocating for legislators to fix regulations and promote legislation that addresses corrupt practices.

Research on the Identification of "Beneficial Owner" in Tax Treaties: Based on Case Analysis

Nowadays, with the development of cross-border trade and the increase of tax agreements signed between countries, money laundering and tax treaty abuse crime is more and more rampant. The beneficial ownership rule first introduced in the last century by the OECD is an effective way to curb it. Based on introducing the origin and development of beneficial ownership rules, this paper analyzes the differences in international identification standards, then adopts the case analysis method to discuss the differences in the identification standards of beneficial ownership in tax treaties, and finally puts forward suggestions for the construction of a rational identification standard for beneficial ownership.

International legal system for combating money laundering and unfair tax competition

Worldwide efforts to eliminate bank secrecy and foster transparency in international currency flows have accelerated significantly in recent years. The identification of tax havens and potentially harmful tax practices and regimes gives rise to a considerable potential for preventing distortions and violations that could undermine the benefits of enhanced capital mobility in today’s global economy. In the light of the aforementioned, the aim of this article is to detail: 1. efforts of the Organization for Economic Cooperation and Development (OECD) to eliminate «unfair tax competition»; 2. efforts of the Financial Action Task Force on Money Laundering (FATF) to reduce international money laundering; 3. steps being taken in the European Union (EU) to combat money laundering and tax evasion. The author analyzes the OECD's efforts to create a firm international platform for global tax information exchange. The Article also touches upon the FATF initiatives to combat money laundering: a) the FATF Forty Recommendations setting out a comprehensive and consistent framework of international standards which countries should implement in order to combat money laundering and terrorist financing; b) identification of jurisdictions which have the substantial and on-going money laundering and terrorist financing risks and strategic deficiencies; c) inclusion of certain anti-money laundering recommendations applicable to business and professions beyond the financial services industry; d) ongoing investigations of compliance with the Forty Recommendations by FATF members and by other states (mutual evaluations); e) helping national governments and financial institutions to ensure adequate and accurate information on the beneficial ownership. In the last part of the Article, the author analyses enforcement measures to combat money laundering adopted in the EU that go further beyond FATF recommendations.

Transparency on Steroids – Bad for Your Health?

In the waning days of the Trump administration, Congress passed the Corporate Transparency Act (CTA), directing FinCEN to create a beneficial ownership registry for the US. As the CTA’s effective date approaches on 1 January 2024, questions remain about FinCEN’s proposed implementing regulations. In this Talking Points, Melissa Wiley reviews the CTA and the current state of the regulations and discusses the serious compliance and privacy issues they raise.

General Report of the French IFA Annual Conference, 16 November 2022 – Beneficial Ownership, Substance: The Search for Reality

This General Report provides a summary of the presentations given during the annual French IFA conference, which was held in Paris on 16 November 2022. The topic discussed in this conference was “Beneficial ownership, substance: the search for reality”.