In the fight against financial crime, one question continues to cause difficulty worldwide: Who really owns and controls a business? Despite reforms, beneficial ownership remains a weak point in many countries. Information is often incomplete, outdated or difficult to verify.
Why It Matters
Criminals rely on anonymity. By hiding behind layers of companies and nominees, they can move funds without detection.
How Criminals Hide Behind Layers of Companies and Nominees
Across evaluations by the Financial Action Task Force, one theme appears repeatedly: criminals rarely move money in their own name. Instead, they construct complex ownership structures designed to obscure control.
Example 1: Multi-Layered Corporate Structures
In one pattern identified, investigators encountered companies owned through multiple legal entities across jurisdictions. A local company appeared to be owned by another company. That company was owned by a second entity in a different jurisdiction. Ultimately, control rested with an individual hidden several layers up. Nominee directors were used at each level, creating the appearance of separation.
In this type of scenario, businesses struggled to identify the ultimate beneficial owner, particularly where cross-border structures were involved. Funds could be transferred between related entities while appearing to be legitimate commercial transactions.
Example 2: Use of Nominee Shareholders in Offshore Structures
In another recurring typology, a company is registered with nominee shareholders and directors. The true owner remains undisclosed. Bank accounts are opened in the company’s name and transactions are then conducted through the company, masking the identity of the real controller.
Authorities identified gaps in beneficial ownership transparency, making it difficult to trace control. Criminals could move funds internationally without linking activity to themselves.
Example 3: Trade-Based Money Laundering Through Corporate Layers
A typical structure involved multiple companies set up to act as importers and exporters. Goods were invoiced between related entities at inflated or deflated values and payments routed through several company accounts. Each company appeared legitimate on its own. Trade-based money laundering remains a significant risk, with complexity making detection difficult.
Example 4: Real Estate Purchases via Corporate Vehicles
In this typology, high-value property is purchased through a company. The company is owned by another entity or trust and the true owner is hidden behind nominees.
What These Examples Show
Across jurisdictions, the same vulnerabilities appear:
- Opacity of ownership structures
- Reliance on nominee directors/shareholders
- Weak verification by businesses
- Limited ability to connect related entities
These weaknesses allow criminals to distance themselves from transactions, disguise the origin of funds and move money through the financial system undetected.
What Businesses Must Do
Businesses must go beyond surface-level checks. They need to:
- identify the true beneficial owners
- understand ownership structures
- verify information independently
- keep records up to date
Establishing beneficial ownership is not easy—but it is essential.
Louis Parris is an Anti-money laundering Audit, Risk & Training Consultant.