Corporate Structuring

Through corporate structuring, criminals establish complex or layered business entities explicitly to obscure beneficial ownership and the illicit origin of funds, leveraging legitimate-appearing corporate frameworks to conceal ultimate control.

Simulated M&A and incorporation related transactions add financial complexity, making it more difficult to trace funds back to their criminal source.

This technique primarily exploits vulnerabilities in customer due diligence by creating complex or layered corporate ownership structures. Criminals obscure beneficial ownership and true control of assets, making it challenging for financial institutions to identify and verify ultimate owners. The continual manipulation of corporate hierarchies directly undermines KYC processes and beneficial ownership transparency, thus constituting the central operational vulnerability of this technique.

Criminals deliberately register or connect corporate entities across multiple jurisdictions with lax regulatory requirements or inconsistent corporate disclosure standards, increasing opacity. By exploiting these inter-regional discrepancies, they make oversight and beneficial ownership tracing more difficult, using cross-border structuring to layer illicit funds and evade regulatory scrutiny.

• Provides profiling of jurisdictions with weak corporate disclosure requirements.
• Identifies mismatches between a company’s registration location and its principal business markets.
• Aids in assessing cross-border layering risks where corporations exploit varying disclosure obligations.

• Encompasses financial statements, tax filings, and profit-and-loss reports.
• Reveals discrepancies in reported valuations or manipulative accounting practices.
• Assists investigators in verifying whether reported corporate finances match real economic activity.

• Contains invoices and contracts specifying goods or services, payment terms, and pricing details.
• Detects unusual or inflated invoicing practices within affiliated entities.
• Helps confirm whether invoiced goods or services were delivered, correlating with actual transaction flows.

• Maintains detailed records of inter-company payments, including timestamps, amounts, and parties involved.
• Helps identify unusual or frequent cross-company transfers that lack an economic rationale.
• Correlates with invoice or contractual data to detect fabricated or inflated billing among affiliated entities.

• Central repository holding corporate formation records, dissolution filings, and related documents.
• Enables verification of the stated reasons for frequent entity changes and cross-checking the authenticity of corporate paperwork.
• Supports investigators in obtaining detailed corporate documentation for analysis.

• Contains verified information on a company's actual operations, revenues, and expenses.
• Assists in determining whether corporate entities are truly active or serve as shells.
• Helps compare reported economic activity against financial statements to detect inconsistencies or fabrication.

• Auditor reports evaluate the accuracy of financial statements and internal controls.
• They flag irregular fair value adjustments or questionable accounting practices.
• They provide independent confirmation of a company’s declared finances, uncovering hidden ownership or money flows.

• Includes verified customer identities, addresses, and beneficial ownership details.
• Enables detection of overlapping beneficial owners, suspiciously shared corporate addresses, or unexplained ownership changes.
• Facilitates cross-checking patrons, revealing potential shell or front companies hidden within corporate structures.

• Consolidates official information on company registration, directors, shareholders, and beneficial owners.
• Identifies common addresses or management across multiple entities, spotting potential layering techniques.
• Tracks repeated entity formation or dissolution events, highlighting manipulative corporate practices.
• Uncovers cross-border registrations used to obscure illicit fund flows.

Assign higher risk ratings to companies registered or actively operating in jurisdictions with lenient corporate disclosure requirements. Require additional scrutiny for inter-company relationships and fund flows involving such regions, and restrict or decline services if the layering indicators suggest concealed beneficial ownership or regulatory evasion.

Conduct thorough reviews of corporate ownership by verifying all beneficial owners, checking for multi-tiered structures or shared addresses, and evaluating the legitimacy of cross-border relationships. Obtain independent documentation of corporate governance, closely examine the declared fair value of assets, and flag any frequent or unexplained changes in ownership or control. By applying deeper scrutiny, institutions can identify anomalies that indicate disguised beneficiaries and manipulative accounting in layered corporate vehicles.

Implement focused scenario-based and rules-driven monitoring for complex inter-company transactions spanning layered corporate entities. Pay special attention to circular fund flows, repeated re-routing of funds to the same ultimate beneficiaries, and transaction volumes or frequencies that deviate from stated business profiles. Escalate any unusual layering patterns for further investigative review.

Screen newly formed or reconfigured corporate entities, board members, and beneficial owners against sanctions lists, watchlists, and adverse media databases. Establish enhanced monitoring to identify attempts at sanctions evasion through layered or newly created entities that shift funds across different regions. Block or freeze activity tied to any sanctioned parties or regions known to enable corporate secrecy.

Cross-check corporate registration data, addresses, and management details using public registries and external tools to detect companies sharing addresses or beneficial owners lacking legitimate economic rationale. Verify fair value assessments with independent third-party documentation or market data. This process reveals disguised affiliations and layered ownership across multiple jurisdictions.

Routinely re-validate beneficial ownership structures and governance details, comparing new information with historical records to detect frequent or unjustified ownership changes. Investigate any newly emerged controllers who cannot provide credible business reasons for taking over. Maintain oversight of financial statements for potential manipulated valuations or other evidence of suspicious corporate maneuvering.

Scrutinize inter-company trade activity for inflated or falsified invoices, missing or inconsistent shipping documentation, and manipulated fair value figures. Confirm the legitimacy of each transaction's commercial purpose and verify that the underlying goods or services exist. Identify repetitive patterns of over- or under-invoicing within affiliated corporate entities to detect corporate layering and illicit cross-border value transfers.

• Criminals register multiple business bank accounts under interlinked or shell corporate entities, integrating illicit proceeds as ostensible corporate income.
• Repeated transfers among these accounts create a complex money trail, layering funds and masking their origin.
• The legitimate appearance of business transactions in daily corporate banking activity helps conceal beneficial ownership and true fund sources.

• Illicit funds are funneled into property acquisitions under corporate entities, sometimes supported by fabricated valuation or accounting reports to legitimize capital inflows.
• Criminals shift ownership among affiliated entities, layering transactions and obscuring the ultimate controller of high-value properties, often across multiple regions with inconsistent disclosure standards.

• Trust arrangements add another layer to corporate structures, with trustees or nominees listed instead of the true beneficiaries.
• By housing beneficial interests under trusts operating in different jurisdictions, criminals further shield the identity of ultimate owners from financial institutions and regulators.

• Bearer shares allow for the transfer of corporate ownership merely by handing over share certificates, bypassing formal registration processes.
• When utilized in multi-tiered entities, they obscure the true controlling parties, enabling criminals to quickly rearrange and conceal beneficial ownership across different jurisdictions.

• Criminals generate inflated or fictitious invoices among their layered entities, creating the appearance of legitimate inter-company transactions.
• These receivables provide a paper trail justifying fund movements, effectively distancing money from its illicit source under the guise of standard corporate billing.

• By distributing ownership among multiple affiliated companies or shareholders, perpetrators diffuse actual control across complex corporate layers.
• The legitimate nature of equity stakes conceals beneficial owners behind formal corporate structures, distancing illicit proceeds from the ultimate controllers.

• Legal advisors can structure multi-jurisdictional corporate vehicles, adding complexity that hinders identification of true owners.
• Drafting sophisticated agreements and trust deeds can camouflage criminally derived assets behind formal legal documentation.

• Criminals can establish multiple business bank accounts under interlinked corporate entities to co-mingle illicit proceeds with ostensibly legitimate transactions.
• Repeated transfers among these accounts obscure the origin and flow of funds, complicating efforts to trace beneficial ownership.

• Complicit or negligent accountants may produce falsified financial statements, legitimizing illicit funds moved through layered corporate entities.
• Complex bookkeeping across affiliated companies can obscure suspicious inter-company transfers and hinder tracing of beneficial ownership.

• Enables the swift setup of offshore entities in jurisdictions with lax disclosure requirements, obscuring beneficial ownership.
• Criminals employ multiple offshore companies across different regions, facilitating complex cross-border layering and minimizing regulatory scrutiny.

• Facilitates the formation and management of intricate corporate vehicles, enabling layered ownership arrangements and nominee appointments.
• Providers may operate across multiple jurisdictions with minimal disclosure, obscuring ultimate beneficial owners and impeding AML investigations.

TCSPs support opaque corporate structuring by:

• Forming new entities, appointing nominees, or providing registered office services across jurisdictions with weak disclosure.
• Maintaining layered corporate arrangements, complicating beneficial ownership checks for financial institutions.

Complicit or negligent accountants enable complex corporate structuring for illicit finances by:

• Falsifying financial statements or fair value assessments to legitimize suspicious flows.
• Establishing intricate bookkeeping or inter-company transactions that mask the true source and control of funds.

Professional money launderers orchestrate the use of complex corporate structures by:

• Registering or managing multiple business entities across different jurisdictions to layer illicit funds.
• Leveraging specialized knowledge of regulatory gaps and corporate governance to conceal ultimate beneficiaries and launder proceeds.

Business entities, including shell or front companies, offshore entities, and private interest foundations, are leveraged to:

• Open accounts and process incoming or outgoing funds, commingling illicit proceeds with legitimate business revenues.
• Obscure beneficial ownership through layered corporate registrations or minimal public disclosure.
• Facilitate cross-border layering and regulatory evasion by operating across multiple regions with varied oversight requirements.

Beneficial owners remain hidden within layered corporate arrangements by:

• Structuring or registering multiple entities to distance personal identity from the control or proceeds of assets.
• Exploiting gaps in corporate disclosure across regions, impeding financial institutions' ability to identify true ownership.

Nominees are inserted into official records to:

• Stand in as directors, shareholders, or officers, shielding the real controlling individuals.
• Obfuscate direct ownership links, complicating due diligence and beneficial ownership checks by financial institutions.

Legal professionals facilitate multi-tiered corporate setups by:

• Drafting incorporation documents, trust deeds, or nominee agreements that conceal beneficial owners.
• Overseeing entity formation in multiple jurisdictions, exploiting inconsistencies in disclosure requirements.