The misuse of corporate vehicles
| Date | 01 April 2003 |
| Published date | 01 April 2003 |
| Pages | 133-134 |
| DOI | https://doi.org/10.1108/13590790310808691 |
| Author | Talmai P. Morgan |
| Subject Matter | Accounting & finance |
The Misuse of Corporate Vehicles
Talmai P. Morgan
This paper is a comment from an Oshore Financial
Centre Ð albeit one which the Financial Stability
Forum regarded as a Division 1 jurisdiction and,
one which, in the opinion of the Financial Action
Task Force (FATF) is not a Non-Cooperative
Country or Territory. Guernsey is actually a highly
cooperative jurisdiction, but as a so-called OFC is
demonised by many who do not wish to analyse
things too rigorously but prefer to wallow in the
warm waters of prejudice. The reality is, of course,
that there are many bad oshore centres, but there
are also many bad so-called onshore centres.
The OECD Report
1
is very welcome. It makes a
valuable contribution to highlighting a real problem
Ð the misuse of corporate vehicles for illicit
purposes.
The report refers to the three fundamental
objectives, namely that:
Ð bene®cial ownership and control information
must be maintained or be obtainable by the
authorities;
Ð there must be proper oversight and high integrity
of any system for maintaining or obtaining
bene®cial ownership and control information;
and
Ð non-public information on bene®cial ownership
and control must be able to be shared with
other regulators and law enforcement authorities,
both domestically and internationally.
There are few people who would want to argue with
these three fundamental objectives.
The report then sets out a menu of options
for obtaining bene®cial ownership and control
information, in three broad categories:
Ð primary reliance on up-front disclosure to the
authorities;
Ð primary reliance on interm ediaries to maintain
the information; and
Ð primary reliance on an investigative system.
This approach is helpful. It sensibly recognises that
there is diversity in the world and that one size does
not ®t all. It is not like Henry Ford Ð `any colour
as long as it is black'. What is important is that the
menu choices made in each jurisdiction are sucient
to do the job.
It might be helpful to compare Guernsey (and also
a few other jurisdictions) against the menu of options
referred to in the report. First, up-front disclosure to
the authorities. In Guernsey, in order to incorporate a
company proposed, bene®cial ownership must be
declared in advance to the authorities and the
Guernsey Financial Services Commission (GFSC)
actually undertakes due diligence on such proposed
owners using a variety of databases and bilateral con-
tacts with regulators and others in other countries.
The system works well. There are only two other
countries (Jersey and Bermuda) that also require the
prior disclosure of bene®cial ownership. To be
fair of course, this is helped by the factor of scale.
Guernsey only has some 15,900 companies as against
say 1.5 million in the UK (32,864 in Jersey and 41,747
in the Isle of Man) or say 300,000± 400,000 each in the
British Virgin Islands or Panama. So what suits
Guernsey may not necessarily suit others.
Secondly, primary reliance on intermediaries to
maintain the information. In Guernsey, there is
now a very robust law to regulate ®duciaries, admin-
istration businesses and company directors. All such
individuals and entities must apply to the GFSC for
a licence to act as such, and must be able to demon-
strate that they are `®t and proper' in terms of integ-
rity, competence and solvency. Acting as a trust
company or co-director etc without a licence is a
criminal oence carrying a jail sentence. It is a
robust supervisory system, which involves on-site
inspections and the examination of client ®les.
Section 44 of the Law
2
permits disclosure of con®-
dential information by the GFSC in a large number
of instances including for the purpose of assisting
overseas regulators, or for the purposes of the inves-
tigation, prevention or detection of crime, or with
a view to the instigation of or otherwise for the
purposes of any criminal proceedings whether in
Guernsey or overseas. Jersey has also adopted very
similar legislation, as has the Isle of Man for corporate
service providers, but is now looking to extend the
legislation as speedily as possible to trust activities as
well.
Page 133
Journal of Financial Crime Ð Vol. 10 No. 2
Journal of Financial Crime
Vol.10,No. 2,2002, pp. 133 ±134
#HenryStewart Publications
ISSN 1359-0790
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