Kenneth Rijock

Kenneth Rijock

Saturday, April 30, 2016

NOTE TO FINCEN; REQUIRE DUE DILIGENCE ON ALL SHAREHOLDERS, NOT JUST THOSE WITH 25%




The pending proposed shell company regulations, designed to require US banks to obtain the identities of all shareholders of twenty-five per cent or more of corporations holding accounts, are flawed, and requires modification, to be effective. You have to give the practicing money launderings working in America due credit for both imagination, and diligence, for they stay up night and weekends, just to beat the banks.

A decade ago, before I was the Financial Crime Consultant for World-Check, I was a compliance officer at a large investment firm, specializing in enhanced due diligence investigations. Our rule was simple: all ten per cent or larger shareholder of a client corporation were to be the subject of at least a due diligence check. The customer service/sales staff told their prospective clients to reduce the share ownership anyone who was dodgy to 9%, to evade that requirement. When I found out about it, I had the floor reduced to 5%. When it comes to commissions and bonuses, your sales staff will find a creative way around your fixed rules.

If you are a money launderer, and you have a client that will not pass muster, you can give him only a token number of shares, and have the controlling shares held in another name, and endorsed in blank, to be filled in only when needed. As you can see, the FinCEN rule will be ineffective.

To properly evaluate risk levels of a corporate account holder:

(1) Check ALL shareholders, not just those who are prominent.
(2) Physically examine the stock certificates, to ascertain whether any are endorsed in blank, and make photocopies.
(3) Require that the corporation's attorney sign an Opinion of Counsel, attesting to his own due diligence, and identifying all beneficial owners by name and address, and warranting that he will notify the bank, via registered mail, should there be any change in ownership. Lawyers who are partners at major US law firms will not jeopardize their law licenses. If there is no opinion rendered, decline the account. If their lawyer does not trust them, you do not either.

1 comment:

  1. Almost all companies who make due diligence use virtual data room systems. Most of them give you free 14 days trial, like this one due diligence data room.

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