Finding ultimate beneficial owners is important because of the dangers of tax evasion, drug trafficking, corruption and terrorism. But too many countries still allow camouflaging of these owners and there are clever lawyers and accountants to help
On February 3, SEBI issued very elaborate and consolidated guidelines on how intermediaries registered by it should help prevent money laundering.
It is reported that, yet again, a fresh exercise has been made to track ‘real’ owners of investments. This time, it is by those have invested as foreign portfolio investors. In most cases, these “real owners” would be an individual or individuals, i.e. human beings, behind a corporate or other legal entity. A company has, by definition, existence independent of its shareholders and directors and can own, transfer, deal in, etc. property in its own name. But a company has ‘no soul to be damned and no body to be kicked’.
Elaborate Smoke Screen
So, if one pierces the veil, there would generally be living individuals with body and soul who would benefit from the funds and would be directing the affairs of the company. These are generally understood as ‘beneficial owners’. Often, the shareholding of a company may be held by another company, and then by yet another, etc, each spanning over different continents. But still, there would, at the end of the chain, be individuals who would be owning the funds and directing the affairs of the company. Such individuals are called the “Ultimate Beneficial Owners” (UBOs).
Companies and similar other entities that are the creation of law may be used as fronts to be shown as owners of monies. While this may be for bonafide and business reasons to shield the shareholders by offering limited liability, it may also be used to hide the UBOs for nefarious purposes. This is nothing new in India and the term ‘benami’ is almost ancient, where property is held in one name while the real beneficial owner is someone else.
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