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Could you become part of a “Panama Papers” problem? PDF Print E-mail
Friday, 08 April 2016
Recent press stories surrounding the documents held by Panama-based law firm Mossack Fonseca, collectively called “The Panama Papers”, have given ‘nominee directors’ a starring role for their ability to hide the identities of beneficial owners. And, through that, hide the realities behind billions of pounds’worth of business transactions. 

Alan Norton, Head of Intelligence at Graydon UK, explores the murky world of nominee directors

Nominee directors – always based beyond the jurisdiction of the offenders’ own countries – sign official company documents, thus giving the real players substantial legal skirts to hide behind. Fraudsters of all kinds, including tax evaders, pay well for the resulting anonymity. And they can afford to, because the proceeds of their dodgy deals are well in excess of their legitimate income.

In its 2013 report, ‘Secret Structures, Hidden Crimes’, the European Network on Debt and Development (Eurodad) explained how opaque legal structures are one of the best ways to hide the real ownership of entities thereby facilitating money laundering, tax evasion, and related crimes.

And, thanks to the Panama Papers, we now know for sure that the client lists of these nominee directors, any one of whom can represent hundreds or even thousands of companies, include those owned by world leaders, billionaires, celebrities and sports stars as well as prominent members of the criminal fraternity.

Nominees, despite being directors in name, are beyond the reach of company law. And this includes the UK. They have absolutely no responsibility for the activities of the companies they represent. And, before allowing the use of their names, addresses and signatures, they will also seek protection from all financial liabilities.

The British Government has tried to crack down on this activity, but its hands are tied. Until the late 1990s, the British Channel island of Sark was a hotbed of nominee directors. The local term for this industry was “The Signing.” Sark, an island of 600 souls managed to collect 15,000 directorships in companies around the globe. The Government pounced in 1999 and most of the nominees fled to places like Cyprus or Nevis in the Caribbean, where they carried on their lucrative trade.

A Graydon database example shows a Mr AM Cunningham, (Date of Birth: 18th February 1939) using a service address in Nicosia, as being a company officer of 187 companies having previously resigned from a further 200! You can easily Google partial records for such people – and, while you’re at it, take a look at the connections they have. These are almost as instructive as the raw personal data. In Mr Cunningham’s case, he is well connected with people in Sark. According to Companies House, he even had a business address there until 2001.

It’s easy enough to dig into the background of a single individual or a single company, but it gets exponentially more complex if your business requires you to monitor and check on people and companies continuously. This is where a good credit reference agency can help. They hold vast amounts of data on company directors and can help assist in establishing the true identity of your trading partners.

With the legal implications and the potential damage to your company reputation, it’s now more important than ever to understand who you are trading with.

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