If you are considering doing business with a company based in the United Arab Emirates (UAE) and wondering who really controls it, your chances of finding out just got better.
Starting last week, more than 500,000 companies in the Emirates must now disclose their ultimate owners or face sanctions, as the Middle East financial hub tries to avoid being put on a global dirty money watchlist by the Financial Action Task Force (FATF).
This is decidedly good news for business ventures – and corporate investigations – involving entities registered in the Emirates.
To be sure, beneficial and legal ownership data will only be disclosed to the government and not be publicly accessible.
But if you have confidential sources in the region, or a professional intelligence provider who does, the mirage in the desert will be lifting after all.
The FATF, an intergovernmental anti-money laundering watchdog, said fundamental and major improvements were needed to avoid it placing the UAE on its “grey list”. Countries who are placed on this list face substantially increased transaction costs accessing global finance and banking systems.
The penalties for failing to disclose the beneficial owners include a written warning, a 100,000 dirham (23,000 €) fine, license suspension or restrictions on the powers of the board.
The UAE is among the jurisdictions in the world who are notorious for opaque shell companies, some of which are involved in money-laundering, fraud, sanctions evasion and terrorism financing.
Beneficial Owners: Why They Matter
Every business deal carries its own opportunities and risks, but when it is unknown who is really in charge in a given firm, those risks increase exponentially. For instance, what if the beneficial owners are
- under sanctions or otherwise blacklisted by the U.S., E.U. or individual nation states
- part of a money-laundering network
- trying to defraud you
- a front for criminal groups
- a front for state actors, i.e. spy agencies
- or the contact person you have been speaking to is an impostor and the company’s beneficial owner(s) are unaware of him?
These are all scenarios we have actually experienced as investigators when dealing with entities whose owners were hidden.
If at some point of the planned deal push comes to shove, such companies can pose a potentially toxic risk for a company’s reputation as well as its regulatory and legal exposure – and a threat to their financial bottom line.
Better to have full transparency in advance. Particularly in countries where the line between appearance and reality is easily blurred.
The author:
Sebastian Okada heads the Investigation & Fraud Prevention department at Corporate Trust in Munich. He has been performing enhanced due diligence (EDD) and investigations of companies and individuals in the Middle East and worldwide for over 15 years.
+49 89 599 88 75 80
intelligence@corporate-trust.de
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