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Anonymous Companies, UBO and Financial Crime

In 2017, Global Financial Integrity (GFI) did a study on transnational crime and found that the combined annual value of 11 different transnational criminal markets was between US$1.6 trillion to US$2.2 trillion.

Groups including the FARC, the so-called Islamic State, the Lord’s Resistance Army, and political regimes such as Nicolas Maduro’s in Venezuela that operate as a transnational organised criminal network all utilise these lucrative criminal markets to line their pockets, consolidate power, perpetuate violence, and directly harm the safety and security of government interests.

Anonymous companies play an important role in transnational crime, allowing criminals to hide their identities, obscure their illicit activities, and launder their ill-gotten gains.

What is an Anonymous Company?

An anonymous company is a company or a series of companies that have disguised their ownership in order to operate without scrutiny from law enforcement and the public. These “phantom firms” can open bank accounts and transfer money like any other company, making them a favourite tool for criminals, money launderers, drug traffickers, illegal weapons dealers, and terrorists that seek to harm economic and national security interests.

The role of the Ultimate Beneficial Owner (UBO)

The main driver of the UBO requirement of the FIC Amendment Act is to address this challenge of criminals using complex entities or legal structures to evade detection or identification. By identifying who ultimately benefits from, or controls and entity, you are reducing the opportunities for them to be used to launder illicit funds.

Real Life Examples:

Drug Trafficking

US$426 billion to US$652 billion annually

Peruvian drug trafficking ring Sanchez-Paredes used anonymous companies in Florida to help launder US$31 million in drug money through US banks.

Crude Oil Theft

US$12 billion to US$48 billion annually

The Maduro regime in Venezuela has stolen US$1.2 billion from the Venezuelan economy by looting the national oil company and through forex manipulation. The proceeds from these schemes have been invested into real estate and show horses in Florida and luxury apartments in Manhattan, all owned through anonymous companies.

Human Trafficking

US$150.2 billion annually

Anonymous companies have also been used to enable human trafficking. A 2018 report from nonprofit group Polaris recently investigated how corporate secrecy facilitates human trafficking in illicit massage parlours, estimating there are over 9,000 of such establishments in the United States.

Illegal Mining

US$12 billion to US$48 billion annually

Illegal gold mining from Latin America is tied to narco-traffickers, sex trafficking, and environmental devastation. U.S. companies have used front anonymous companies to engage in this gold business and Miami has been the epicenter for a US$3.6 billion money laundering scheme.

Weapons Trafficking

US$12 billion to US$48 billion annually

Viktor Bout, “Merchant of Death,” the world’s most prolific arms trafficker, set up a global network of anonymous companies to conduct his illicit activities, including 12 anonymous companies that were set up in Texas, Delaware, and Florida.

Illegal Logging

US$52 billion to US157 billion annually

Charles Taylor, the former president of Liberia and convicted war criminal, used the illegal trade in timber to carry out war crimes, crimes against humanity and other serious violations of international humanitarian law, including pillage, murder, rape, and the use of child soldiers. The proceeds from these crimes were funneled through New York bank accounts using a network of anonymous companies. 

IQ Compliance (Pty) Limited is registered in South Africa 2019/475168/07.  

BBBEE Exempted Micro Enterprise.

Specialists in FICA and financial crime compliance for accountable and reporting institutions throughout South Africa 


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