Kenneth Rijock

Kenneth Rijock

Monday, March 19, 2012

HOW TO FOIL BEARER SHARE SCHEMES

If a bank client seeks to open an account for a company with bearer shares, you have a problem; how can you prevent him or her from immediately transferring ownership and control of the company, and therefore the accounts, by simply physically turning over the shares. Since the owner is not registered in company records, but merely owned by the bearer of same, a person not known to you, who may be totally unacceptable as a client, an OFAC-sanctioned individual, a career criminal, corrupt PEP, or worse, a terrorist financier, you have a potential problem.

Here's my solution:

(1) Require the client to obtain for you an Opinion of Counsel, signed by a senior partner at an onshore major law firm in the (non-tax haven jurisdiction) country where he holds citizenship, attesting to his stock ownership, due to a due diligence inquiry. Lawyers have licenses to protect, and they will not give such a letter lightly, nor to anyone other than valued, legitimate clients.

(2) Demand a sworn (notarised) affidavit from the client, confirming his ownership of the bearer shares, and recognising that he has an affirmative duty to notify you, by registered mail, or its local equivalent, should he sell, transfer, encumber, mortgage, or in any way divest himself of those shares.

Money launderers and their clients do not like to sign affidavits that could be used to indict them at a later date; if the client will not give you (1) and (2), you do not want his or her business. Many legitimate clients will complain about this procedure, but it may be the only way to minimise your risk.

Note: Do NOT buy into the client's statements that a Custodian will hold the shares of stock in the (offshore) jurisdiction of incorporation. Do you really want to file a civil suit in that country against the financial services professional, or attorney, after you find that they have evaded their responsibility, and found a way to transfer ownership to a criminal element ? Obviously not.

Frankly, anyone who accepts a company with bearer shares assumes an uncomfortable level of risk, but if you must do it, mimimise risk through my solution, or choose an alternative, but it must be effective.

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