Financial Crime World

Here is the converted article in markdown format:

Beneficial Ownership: The Silent Controller

==================================================

In the world of business, partnerships and trusts are common entities used to achieve financial goals. However, behind the scenes, beneficial ownership can have a significant impact on decision-making processes. According to experts, a partner or individual with ultimate control over assets, profits, and operations can exert indirect influence over the management and operations of a partnership or trust.

Identifying Beneficial Ownership in Partnerships

The Financial Action Task Force (FATF) has identified several indicators of beneficial ownership in partnerships:

  • Power to Declare or Make Decisions on Profit Sharing: If a partner controls the declaration of profits, they can indirectly influence the operations of the partnership.
  • Power to Retain Profits for Capital Investments: A partner with authority to retain profits can control the distribution of dividends and indirectly manage the partnership.
  • Power to Amend the Partnership Instrument: A partner who can modify the partnership agreement without reservations has significant indirect control over the partnership.

Identifying Beneficial Ownership in Trusts

Trusts are another common legal entity that can be affected by beneficial ownership. According to Nauru’s Trusts Act 2018, a beneficial owner is defined as:

  • A Natural Person with Ultimate Control: A person who has ultimate control, directly or indirectly, over the trust.
  • The Person Who Owns the Trust Directly or Indirectly: The person who ultimately owns the trust, directly or indirectly.
  • Settlor, Trustee, Protector, or Beneficiary: The settlor, trustee, protector, or beneficiary who created the trust on their behalf.

In trusts, beneficial ownership can be attributed to various individuals or entities, including:

  • Trustees: Those appointed to manage and control the trust
  • Settlors: Individuals who establish the trust and retain some level of control or authority
  • Protectors: Third-party agents who manage and control the trust on behalf of beneficiaries
  • Beneficiaries: Classes of individuals who may have influence over decision-making processes

The FATF requires additional measures to identify beneficial owners in trusts, particularly when transactions are conducted on behalf of the trust.

Conclusion

Beneficial ownership can have a significant impact on decision-making processes in partnerships and trusts. As demonstrated by the indicators identified above, certain individuals or entities may exert indirect control over these entities without being directly listed as owners. It is essential to identify beneficial ownership to ensure transparency and prevent potential abuse.