Key Highlights – Beneficial Owner Manipulation
Beneficial ownership manipulation means deliberately creating layered corporate structures or falsifying ownership or control information to obscure the identity of the natural person carrying out the transaction. Key techniques used to conceal beneficial owners’ identity include layered corporate structures, rapid ownership changes, strawmen, nominee owners, and offshore entities.
It is important to ensure corporate transparency and know the real people behind the business operations to combat financial crime. This is because hidden ultimate beneficial owners (UBOs) may facilitate money laundering, tax crime, sanctions evasion, and corruption. The structures help in disguising the true origin of funds and move money undetected across borders.
Criminals use offshore financial centres or tax havens for the formation of shell companies. This creates a need to prevent the misuse of funds and enhance public trust and AML/CFT compliance.
Common red flags, risk indicators, and patterns of beneficial ownership manipulation or UBO fraud include:
FATF, which establishes global AML/CFT requirements, mandates Regulated Entities to identify UBOs to mitigate ML/FT risks and unmask complex structures. Regulated Entities must perform enhanced due diligence for entities with complex structures or high-risk corporate clients.
Further, FinCEN mandates businesses to disclose beneficial owners’ information to its secure and non-public database. Also, the EU AMLR requires member states to establish publicly accessible registers with UBOs’ information.
With the above, Regulated Entities must maintain records for UBO identification and verification, perform ongoing monitoring, and ensure timely review of their information for accuracy. In cases where entities find ownership information manipulative or deceptive, they must escalate and file SAR/STR reports to comply with AML/CFT laws.
RapidAML software helps connect the dots to simplify the complex legal structures across multiple data sources and build a web of connections to identify true owners. The name screening software helps screen directors, UBOs, and linked entities against PEP, sanctions, and adverse media lists.
RapidAML automates anomaly detection in corporate structures and declares the true identities of owners. Moreover, the software facilitates risk scoring to demonstrate high-risk corporate clients who require enhanced due diligence. With an effective case management solution, RapidAML ensures workflow integration and audit trails to speed up review and regulatory reporting.
UBO manipulation is executed through shell companies, appointing nominee shareholders, frequent ownership changes, and bearer shares.
Ownership thresholds differ from country to country. According to the CBUAE rulebook, individuals or groups holding an interest of 25% or more are termed beneficial owners in UAE.
Industries such as real estate, finance, and cash-intensive, while jurisdictions with weak AML/CFT laws or enforcement, offering offshore financial centres, or possessing legal arrangements, make it easier to hide the money or true identity of owners.
Institutions should collect data to perform KYB checks and CDD procedures. They can use tools like RapidAML that automate data collection and verify across various global databases.
Yes, software such as RapidAML, with effective data analysis, pattern recognition, ongoing monitoring, and efficiency features, helps detect complex or masked ownership networks.
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