Many unknown shell companies are one of the most common methods of laundering proceeds from crime and corruption, according to the latest report by the Financial Action Task Force (FATF) of the Paris-based International Finance Agency.
Its most recent report identifies best practices to help countries eliminate the secrecy surrounding the ultimate owner of a business, foundation, association or other legal entity and prevent their misuse for crime and terrorism, “The transparency of beneficial ownership is crucial to prevent the misuse of companies, associations or other money laundering or terrorist financing organizations,” the report said.
An economic owner is a legal name for a person who enjoys the benefits of ownership, although the ownership of that property or business is a different name.
According to the recommendations of the FATF, countries must ensure that the authorities receive up-to-date and accurate information about the persons behind companies, foundations and other legal persons.
In early 2016, the International Consortium of Investigative Journalists published the so-called “Panama Papers” documents documenting the economic ownership of several thousand offshore companies. While many were used legally, the papers showed that some of the beneficial ownership was hidden for nefarious or illegal reasons.