The Puppet Masters How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It

by van der Does de Willebois, Emile; Sharman, J.C.; Harrison, Robert; Park, Ji Won; Halter, Emily

• ISBN13: 9780821388945
• ISBN10: 0821388940
• Format: Paperback
• Copyright: 2011-11-03
• Publisher: World Bank Publications

Summary

Billions in corrupt assets, complex money trails, strings of shell companies and other spurious legal structures. These form the complex web of subterfuge in corruption cases, behind which hides the beneficial owner- the Puppet Master and beneficiary of it all. Linking the beneficial owner to the proceeds of corruption is notoriously hard. With sizable wealth and resources on their side, they exploit transnational constructions that are hard to penetrate and stay aggressively ahead of the game. Nearly all cases of grand corruption have one thing in common. They rely on corporate vehicles- legal structures such as companies, foundations and trusts -- to conceal ownership and control of tainted assets.The Misuse of Corporate Vehicles takes these corporate vehicles as its angle of investigation. It builds upon cases, interviews with investigators, corporate registries and financial institutions, as well as a '¬Ümystery shopping'¬" exercise that provide factual evidence of a criminal practice. This approach is used to understand the nature of the problem and design policy recommendations to facilitate the investigative process by unraveling the complex world of CVs. This lucidly written report is solidly built on step-by step arguments and designed to deliver practical, applicable and well substantiated recommendations. It is intended for use by policy makers in developing national legislation and regulation as well as international standard setters. It also provides helpful information for practitioners engaged in investigating corrupt officials and academics involved in the study of financial crime.

Table of Contents

Foreword	p. ix
Acknowledgments	p. xi
Abbreviations	p. xv
Executive Summary	p. 1
A Significant Challenge	p. 1
The Elusive Beneficial Owner: A Call for a Substantive Approach	p. 3
Wanted: A Government Strategy	p. 4
The Advantages of Service Providers	p. 5
Why Service Providers Should Be Obligated to Conduct Due Diligence	p. 5
Enforcing Compliance	p. 6
Attorneys and Claims of Attorney-Client Privilege	p. 6
A Two-Track Approach	p. 7
Why Due Diligence Is Not Enough	p. 8
Enhancing the Skills and Capacity of Investigators	p. 8
Transnational Investigations	p. 9
Building a Transnational Case	p. 9
Conducting Risk Analysis and Typologies	p. 9
The Misuse of Corporate Vehicles	p. 11
Introduction	p. 11
Objective of This Report	p. 13
How to Use This Report	p. 15
The Beneficial Owner	p. 17
Introduction	p. 17
Origin of the Term "Beneficial Owner"	p. 18
Defining Beneficial Ownership: The Theory	p. 19
Applying the Concept of Beneficial Ownership in Practice	p. 23
The Service Providers Perspective	p. 26
Conclusion and Recommendations	p. 29
Where Does the Beneficial Owner Hide?	p. 33
Introduction	p. 33
Corporate Vehicles: Types and Features	p. 33
Conclusion and Recommendations	p. 65
Finding the Beneficial Owner	p. 69
ntroduction	p. 69
Company Registries	p. 69
Trust and Company Service Providers	p. 84
Financial Institutions	p. 97
Conclusion and Recommendations	p. 102
Compliance with Financial Action Task Force on Money Laundering (FATF) Recommendations 5,12,33, and 34	p. 109
Texts of FATF Recommendation 5 and Recommendation 12	p. 109
Texts of FATF Recommendation 33 and Recommendation 34	p. 112
The Five Component Projects: Methodology and Summary of Findings	p. 117
The Grand Corruption Database Project	p. 117
The Bank Beneficial Ownership Project	p. 122
The Trust and Company Service Providers Project	p. 134
The Registry Project	p. 143
The Investigator Project	p. 144
Short Description of Selected Corporate Vehicles	p. 159
Legal Persons	p. 159
General Partnerships	p. 159
Limited Partnerships	p. 161
Companies	p. 161
Limited Liability Company	p. 164
Foundations	p. 165
Legal Arrangements	p. 165
The Trust	p. 165
Grand Corruption: 10 Case Studies	p. 171
Bruce Rappaport and IHI Debt Settlement	p. 171
Charles Warwick Reid	p. 175
Diepreye Alamieyeseigha	p. 179
Frederick Chiluba	p. 183
Jack Abramoff	p. 187
Joseph Estrada	p. 193
Saudi Arabian Fighter Deals and BAE Systems	p. 198
Pavel Lazarenko	p. 202
Piarco International Airport Scandal	p. 207
Telecommunications D'Haiti	p. 212
An Overview of Corporate Vehicles in Selected Jurisdictions	p. 219
Glossary	p. 265
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