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2012.09.12 - The World Bank report: recommendations to eliminate possibilities of misuse of the corporate services market.

 

The World Bank, a respectable organisation, conducted a detailed review of corporate services titled The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It, in which it examined the most typical cases of misuse of corporate vehicles (for corruption and other illegal purposes) in the review.

Many highly qualified professionals including the World Bank representatives, university professors, representatives of law firms as well as government and regulatory institutions participated in the review.

The review compares conditions for the establishment of companies in different countries, requirements for the registration procedures and further maintenance of legal entities in such countries.

Additionally, during the review, the World Bank carried out a poll among participants of the corporate services market in different countries and evaluated their operations in terms of compliance with the Due Diligence (‘Know Your Customer’) and Anti Money Laundering standards. As a result, it concluded that the worst performers to meet such criteria were providers of corporate services in the most developed countries, for such as the United States of America.

The World Bank concluded that the corporate services market remains vulnerable to persons using corporate vehicles in bad faith, and gives detailed recommendations for improvement of compliance with the Know Your Customer principle and Anti Money Laundering rules.

International Overseas Services comments:

There is no doubt that the corporate services market needs further streamlining to limit the opportunity to misuse corporate tools in bad faith as far as possible.

The World Bank review has been carried out at a highly professional level so that everything contained therein may be accepted in full, with the exception of one recommendation contained in section 4.5 being to reflect the data on the beneficial owner of the company in the corporate registry of the relevant country thus making the information about the owner publicly available.

This principle could work if the situation in all countries of the world had the same high level of democracy and business security. However, in practice many owners of non-resident companies do their business in third world countries, where the level of democracy and business security is far from high.

Security of ownership information is the only way for businessmen of such countries to protect their business from corporate raids and to conduct it on stable and generally accepted conditions, thus limiting possible unlawful actions of their business competitors or other parties. Accordingly, corporate business data security is no less important than in banking. A businessman who conducts his operations within the applicable legal framework should be entitled to the protection of his personal data.

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