Signatures for Sale How Nominee Services for Shell Companies Are Abused to Conceal Beneficial Owners Daniel Nielson and Jason Sharman Contents Executive Summary   1 © 2022 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Key Findings   2 Telephone: 202-473-1000 Internet: star.worldbank.org Introduction   3 Email: starinitiative@worldbank.org Twitter: @returningassets The Uses of Nominee Arrangements: The Good, Some rights reserved. the Bad, and the Ugly   6 StAR—the Stolen Asset Recovery Initiative—is a partnership between the World Bank Group and the United Nations Office on Drugs and Crime (UNODC) Two Examples of the Misuse of Nominee Services   12 that supports international efforts to end safe havens for corrupt funds. StAR works with developing countries Mystery Shopping and the Marketing of Nominee and financial centers to prevent the laundering of the Services   15 proceeds of corruption and to facilitate more systematic and timely return of stolen assets. Data From Audit Study and Field Experiment on This work is a product of the staff of The World Bank Secrecy Services   19 and the United Nations Office on Drugs and Crime with external contributions. The findings, interpretations,and conclusions expressed in this work do not necessarily Comparisons With Mutual Evaluation Reviews   27 reflect the views of The World Bank its Board of Exec - utive Directors, or the governments they represent, the Conclusions and Recommendations   30 United Nations, or its Member States. The World Bank and the United Nations do not guarantee the accuracy of the data included in this work. The boundaries, colors, Notes   32 denominations, and other information shown on any map in this work do not imply any judgment on the part of The References   33 World Bank or the United Nations concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Appendix A: Search Term Library   36 Nothing herein shall constitute or be considered to be a Appendix B: Difference in Proportions Tests for limitation upon or waiver of the privileges and immunities of The World Bank or the United Nations, all of which are Mention of Secrecy Services   37 specifically reserved. Rights and Permissions Appendix C: Frequency of Mentions of Nominee Services by Jurisdiction of Service Provider   38 The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowl- edge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, Design by Sensical Design The World Bank Group, 1818 H Street NW, Washington, Cover illustration by Lindsay Jordan Kretchun DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@ Maps by World Bank Cartography worldbank.org. Executive Summary T his report analyzes a family of related corporate Nominee arrangements are currently both a threat and arrangements in which nominees act as agents of a missed opportunity for policy makers. Such arrange- principals in control of shell companies. It focuses ments are critical to corporate beneficial ownership on how nominee arrangements can be abused to facilitate transparency as a major but underappreciated point of financial crime by obscuring the identity of those in control vulnerability. Strengthening the regulation of nominee of shell companies and on policies designed to counter arrangements can enhance the transparency of shell such abuses. The report draws evidence from a global companies and help reduce financial crime. Taking best mystery shopping exercise based on thousands of solicita- advantage of this opportunity requires greater attention tions for shell companies, as well as marketing information to the transparency of nominee arrangements, better from shell company providers, and journalistic and policy practical enforcement of rules, and replacement of a single research on the topic. country-by-country approach in national evaluations with a more multijurisdictional perspective. Acknowledgments This report was written by Daniel Nielson (University of Texas, Austin) and Jason Sharman (University of Cambridge). The project team included Sol Krause (StAR, UNODC) and Emile Van der Does de Willebois (StAR Coordinator, World Bank) who provided guidance, coordinated, and supervised the project. The authors and team are especially grateful to Michael Findley for his collaboration on the design, data collection, and analysis of the secret shopping experiment on which the report draws; to Tyler Morrow and Chris Zimmer for their research assistance; and to Cedric Mousset (Acting PM, FSI) for his overall support. The team benefited from many insightful comments during the peer review process and thank the peer reviewers for offering their time, valuable perspectives and expertise which helped shape the report. The peer reviewers were Alan Bacarese (Director, INTVP, World Bank), Matt Collin (Economist, MTI, World Bank), Pasquale Di Benedetta (Senior Financial Sector Specialist, FCI, World Bank), Tanna Chong and Ashish Kumar (FATF Secretariat). Signatures for Sale 1 Key Findings „ Nominee services offered by corporate service often explicitly marketed to clients shopping for shell providers can have many different uses, extending on companies as a device to keep the identity of the a spectrum from those that are innocuous and are beneficial owner off the public record. In 14 percent of routinely used for legal business purposes, to those active responses to email solicitations asking to set up that have legitimate purposes but are also vulnerable to shell companies, company service providers suggested, abuse by clients, to those where the primary purpose is unprompted, to use a nominee type of arrangement. to hide the beneficial owner. „ Networks of shell companies with nominees pose a „ Their legitimate uses notwithstanding, nominee arrange- threat to corporate transparency primarily because of ments are one of the most common devices for hiding their inherently multi-jurisdictional nature. Yet there is a the identity of those controlling shell companies, and fundamental disconnect between the multi-jurisdictional they are especially prevalent among the most problem- threat and the single-jurisdiction rules to address this. atic parts of the company formation industry. „ In summary, the evidence presented in this report „ Currently, the lack of attention to the potential and shows that enforcing effective regulation of corporate actual abuses of nominee arrangements constitutes a service providers and regulation of nominee arrange- major vulnerability in the on-going campaign to curb ments is critical to increasing transparency of beneficial the use of untraceable shell companies in financial ownership. crime. Greater attention to enforcement is necessary: „ It is hoped that the recent changes in the FATF rules on the evidence presented in this report is a stark reminder beneficial ownership of legal entities (Recommendation that beneficial ownership rules and those relating to 24), will force a change in that direction, by requiring nominees do not enforce themselves. This point applies more robust transparency rules for nominees, by in particular to beneficial ownership registries. encouraging more robust enforcement, and obliging „ A global “mystery shopping” exercise shows that on authorities to take into account the risks posed by the illicit end of this spectrum, nominee services are foreign legal entities. 2 Signatures for Sale Introduction “Would you like to be anonymous where your ex-spouse, boss, renters, mooching friends and family, and the government doesn’t know your business? Our nominee service keeps your name and contact information off public records by listing a nominee name and contact information instead of yours.”1 D espite their legitimate uses, shell companies are company–enabled crimes. Thus, even if the majority of one of the most common means of facilitating nominee arrangements are used for legitimate purposes, financial crime and flows of dirty money. They do so this report focuses on the potential for abuse of nominee because such companies can be used simultaneously as and related arrangements, especially the use of powers of an alter ego and a veil. As suggested by the previous quote, attorney, that can obscure the beneficial owner and thus nominee arrangements are often a key part of the subter- facilitate financial crimes. fuge whereby a corporate puppet obscures the identity of More generally, the report aims to shed light on the the puppet master. following questions: This report investigates and analyzes the uses of related „ What are the legitimate and illegitimate uses of nominee nominee services for shell companies in light of interna- services? tional rules on corporate transparency designed to combat financial crime. In the context of this report, a nominee is „ How are nominee services marketed in connection with a person who holds a role in a company as a substitute shell companies? or proxy for another who has a more substantive claim to „ What does evidence from a global mystery shopping control, owns the company, or both. Thus, a nominee is in exercise tell us about the prominence of nominee essence a stand-in or a front for the real (beneficial) owner. services in different jurisdictions, and how likely are they A nominee is necessarily a derivative role; the term makes are to be offered to different types of customers? no sense without some sort of principal for whom the nominee is an agent. „ How does mystery shopping evidence about nominee Nominee company directors and nominee shareholders arrangements compare with evidence from other can function like a mask, obscuring the identity of the sources, including Mutual Evaluation Reports conduct- principal on whose behalf the nominee is acting. Like face ed by the international standard setter on anti-money masks, though nominees may be used to conceal, they laundering and terrorism financing, the Financial Action also have a wide variety of legal and legitimate functions. Task Force (FATF) and FATF-style regional bodies? It seems that in most cases, corporate nominee arrange- „ What are the overall implications for beneficial owner- ments are used to carry out these legal and legitimate ship rules? functions. Nevertheless, the masking potential of nominee arrangements makes them vulnerable to abuse. Evidence from a wide range of sources suggests that nominee arrangements are a central and recurring feature of shell Signatures for Sale 3 The Nature of Nominee Arrangements and however, it is important to note that rather than a clear-cut the Scope of the Report separation between nominee and real directors, there is Nominee arrangements are best thought of as a family of something of a continuum. related legal and informal devices. They are not composed Nominee shareholders are also important, though as of a clear-cut category that can be neatly counterposed proxy owners their role tends to be simpler than that of against normal or real directors and shareholders. This directors. Once again, nominee shareholders provide a complexity is in part because nominee arrangements range of more and less legitimate functions. As discussed range on a continuum, from pure signature for sale agree- later in this report, power of attorney arrangements are ments, in which the nominee is simply a front with no real commonly used in combination with nominee services. connection with or knowledge or control of the company, This report distinguishes between nominee directors to other circumstances in which the nominee plays an and nominee shareholders, on the one hand, and corporate important and genuinely independent role. directors and corporate shareholders, on the other—i.e., Formal nominee roles may exist even when they are where one company serves as director or owner of another not explicitly specified in legislation. In this sense, finding company. In many instances, the two types may provide which jurisdictions allow nominee arrangements in equivalent functions. These functions can include the veil- practice is more difficult than just reading laws on the ing or concealment purpose of hiding the names of those books. In a strictly legal sense, there may be no such thing real individuals in control of the company. Nevertheless, as a nominee director distinct from a normal director. In despite these important similarities, corporate and nomi- the context of a company law, a director is a director, nee officeholders are not synonyms, and the differences regardless of what other private legal agreements the are material. For this report, nominees are only natural director has entered into with a principal. In this way, the individuals acting on behalf of another natural individual, category of nominees may be analogous to that of shell the beneficial owner. companies; strictly speaking, companies are companies regardless of their degree of substance. Complicating Sources of Evidence and Mystery Shopping matters further, in instances where the agent (nominee) Most of the existing scholarly research on nominees deals and principal are connected by personal ties of kinship, with their role in publicly listed companies. This report, friendship, or sometimes identity theft, there may not be however, is concerned with only the (mis)use of privately any legal specification of the relationship, as is the case owned shell companies, and thus work on public compa- with professional nominee arrangements set up on a nies is only indirectly relevant. Because of this limitation commercial basis by lawyers and corporate service provid- in the secondary literature, much of the evidence is drawn ers. These complexities make researching and regulating from a global mystery shopping exercise (explained later in nominee arrangements difficult. this report) relying on thousands of email solicitations for Of the different relevant services on offer, which are shell companies and associated corporate bank accounts. often used in combination, nominee directors receive the Further evidence is drawn from the way that the interme- most coverage in this report, because they seem to be the diaries who sell shell companies advertise and explain the most widely available nominee service, as well as the main role of the nominee services they offer. point of vulnerability in hiding beneficial owners and hence These sources are supplemented with material from facilitating financial crime. A particular point of vulnerability interviews, recent data leaks, investigative journalism, and is the mismatch whereby nominee arrangements tend earlier policy reports on shell companies and related topics. to be multijurisdictional, whereas regulation is imposed This report does not intend to contribute to the extensive and assessed on a country-by-country basis. Tighter legal debates about the nature and duties of the role of regulation of nominee directorships is an important but, company director, but instead it focuses on the practical so far, underappreciated point of regulatory intervention uses and abuses of nominees and, secondarily, the against the misuse of shell companies. In particular, there policies designed to regulate these arrangements. is a greater need for transparency in making explicit the The Global Shell Games and Banking Bad mystery identity of those performing the principal and agent roles shopping expeditions (more properly, field experiments) in a nominee relationship, but an even more pressing are based on more than 20,000 email solicitations from need for greater enforcement of the rules. Once again, real shell companies and fictitious consultants seeking 4 Signatures for Sale shell companies, corporate bank accounts, or both. The companies: one focusing on the availability of nominee responses from more than 7,000 corporate service directors (New Zealand) and the other on beneficial providers from 2019 to 2021 provide the most systematic ownership registers (the UK People with Significant Control and direct picture of how shell companies are sold and register). their uses. The third section looks at the marketing of nominee The overall goal of the study is to assess the effective- services from the corporate service providers encountered ness of international beneficial ownership rules. Though in the mystery shopping expeditions, including the para- all email solicitations were made in line with a common doxical idea of the nominee beneficial owner. This material template, deliberate variations were used to vary the risk gives a flavor of not only the services that are available, but profile. These included inserting short text prompts (such also, more important, an insider explanation of how they as insisting on secrecy) or changing the nationality of the can be used in hiding the beneficial owner. person or company to signal different types of risk (such The fourth section discusses the contents of the as corruption or terrorist financing). These variations are mystery shopping dataset and summary statistics and designed to test whether providers are sensitive to custom- provides analysis of the frequency of different types of er risk in accepting or rejecting solicitations, and following nominee services, the relationship to other corporate or breaking international rules on beneficial ownership services, the sensitivity to customer profile, and their transparency, in accord with the central regulatory princi- geographic distribution. Rather than customers having to ple of the risk-based approach. hunt for nominee services, they are routinely offered these In line with the aims of this report, the authors are par- services unprompted by those selling shell companies. ticularly interested in offers from providers using nominee Specifically, of those corporate service providers (CSPs) services and equivalents to hide the beneficial owner. in the mystery shopping exercise willing to do business 14 Because of the different risks in different solicitations, one percent offered nominee services of one kind or another, can see whether nominee services are more or less likely often as part of a strategy to hide the beneficial owner. to be offered to particular types of customers. Because The penultimate section compares the mystery shop- of the global nature and scale of the mystery shopping ping evidence on nominee services from eight selected exercise, one can note how the provision of nominee jurisdictions (Australia; Cyprus; Hong Kong SAR, China; arrangements varies by country. New Zealand; the United Kingdom; the United States; and Vanuatu) against FATF Mutual Evaluation Reports from Structure and Road Map these same jurisdictions. The report discusses how the The first section is an introduction to the general uses of diagnoses and determination of risk match up. nominees, with the most coverage devoted to nominee Finally, the report concludes with a brief recapitulation directorships, followed by briefer consideration of nominee of the main findings and assessment of some possible shareholders, corporate directors and corporate sharehold- reforms to address the problems and vulnerabilities ers, and power of attorney arrangements. For each, the identified. In particular, policy makers may have underem - most important legitimate rationales for these services phasized the importance of effectively regulating nominee are set forth, followed by the way such arrangements can arrangements in complementing existing measures to be abused in hiding the beneficial owner. Despite being ensure beneficial ownership transparency. If nominee presented separately, it is important to realize that these arrangements are not regulated, or if, as is common, reg- services are often offered and used in combination, with ulations remain on the books without being enforced, the nominee directorships and power of attorney being a identity of the real people in control of shell companies will particularly frequent combination. often remain hidden. Given the multijurisdictional nature The second section considers two cases of the misuse of structures using nominee arrangements to conceal of nominee arrangements: (a) those provided by New beneficial ownership, FATF country assessments should Zealand’s GT Group, and (b) those of UK shell companies not only take into account more than domestic entities fronted by Cypriot nominees connected with the massive and regulations, but also consider features of those explosion in Beirut harbor in August 2020 that killed more foreign entities that have a strong link with the assessed than 200 people. These examples also provide a useful jurisdiction. contrast between approaches to stop the abuse of shell Signatures for Sale 5 The Uses of Nominee Arrangements: The Good, the Bad, and the Ugly H igh-profile leaks, recurrent scandals, and academic corporate groups comprised of diverse individual company and applied research over the past two decades interests. Their goals were to allow principals, including have shed light on the central role of shell compa- particular groups of shareholders, to better serve the nies in large-scale, cross-border financial crime. These principals’ particular interests (Lee 2003). Multilateral sources also show that nominee arrangements are one development banks also use nominee arrangements for of the most common devices for hiding the identity of a similar aim. For example, the European Bank for Recon- those controlling shell companies. The authors’ experience struction and Development has used nominee directors to conducting and reviewing years of correspondence with monitor and manage subsidiaries and investee companies, thousands of CSPs and banks also confirms that these particularly with the goal of implementing processes that services often serve to obscure companies’ real owners, strengthen corporate governance and improve shareholder either incidentally or by design. returns (EBRD 2020). However, it is important to note once again that many, An important aspect of nominee directorships is and probably most, uses of nominee arrangements the nominee’s relationship to the nominator (principal). are perfectly legal and innocuous, just as most uses of Often, nominee directors are appointed by individuals or shell companies more generally are perfectly legal and groups of shareholders that require additional assistance innocuous, including those formed offshore. The services in ensuring their interests are represented at board of direc- that are discussed are used, defined, required, or modified tors meetings. In this context, a nominee director works to fit with different contexts in different jurisdictions, but on behalf of a specific nominator, often an existing board this report focuses on general patterns and representative member or a shareholder with an “expectation of loyalty examples. The report gives brief coverage of nominee to [the principal] other than to the company as a whole” services as extending on a continuum from those that are (Boros 1989). The potential for conflict of interest between innocuous and routinely used for legal business purposes a principal’s interests and those of their larger company or to those that have legitimate purposes but are also organization as it relates to the obligations of a nominee vulnerable to abuse to those that have the primary purpose director is the subject of much litigation and scholarship of hiding the beneficial owner. (Lee 2003), but is beyond the scope of this report. Giving a broad sense of these nominee relationships as Legitimate Uses of Nominee Directorships they were intended to be used is nevertheless informative, Nominee directorships were created to allow the for three reasons. First, nominee directors were intended appointment of agents with specialized skills to conduct to be used in complex corporate groups composed of supervisory and advisory duties in complex corporate large, often publicly listed interlinked companies. Second, environments involving one or more publicly listed compa- nominees are expected to have close familiarity with their nies. Here, nominee directors are often appointed with the principal in order to represent the principal’s interests. aim of achieving the principal’s goal of improving corporate Third, the nominee should be qualified to conduct tasks governance and business performance. As one source that advance and defend the interests of the principal. stated, “[today] corporate groups have replaced individual These criteria are quite different from the abuse of nom- companies as the typical legal form for all but the smallest inee arrangements in shell companies discussed later in private enterprises” (Lee 2003, 449). Nominee director- this report, where nominees are simply signatures for sale ships appear to have proliferated in the latter half of the designed to hide the beneficial owner. twentieth century as a managerial tool to monitor devel- Nevertheless, even with regard to privately owned shell opments in an environment dominated by conglomerate companies, nominee arrangements have legitimate uses. 6 Signatures for Sale Shell companies are commonly used as component parts mentions de jure and de facto directors, as well as of more complex corporate structures, which may or may separate categories of shadow and nominee directors not include publicly listed entities (Phillips, Petersen, and (Brown 2019). Some of these categories overlap, but even Palan 2021). These structures may involve dozens or even the authors of the brief admit it is not clear when or how, hundreds of interconnected companies, meaning that the depending on interpretations of conflicting case law. As role of any one company in isolation is nugatory, and so discussed in the penultimate section of this report, other a stand-in director who may act for many companies at countries such as the United Kingdom and New Zealand the same time is all that is required. Holding companies of have a similar legal view of shadow directors, in that those either physical assets or intellectual property rights require who exercise the functions of a director should be legally directors, but given that the only purpose of the company treated as directors. is to passively hold an asset, there is in practice little for directors to do. In such circumstances, one can imagine the Nominee Directors as Signatures for Sale same individuals being nominee directors of many different In a turn from legitimate uses of nominees to their role as a holding companies without anything sinister occurring. veil to hide the real owner, the easiest explanation, received With regard to the use of nominees in the management from one provider in the mystery shopping expedition, of private wealth, a company might be used as part of an follows: estate planning structure, often in combination with a trust, or perhaps a foundation in civil law jurisdictions. Here the “What is Nominee Service: Nominee service beneficial owner who is bequeathing the estate is equiva- is basically renting another person’s name lent to the settlor of the trust, and the nominee’s role may to protect the identity of the real beneficial owner. be entirely passive until the principal (beneficial owner) has Information of all directors and shareholders of Hong died, at which time the nominee has an important job in Kong companies are available to the public. There- assisting the distribution of the estate in accord with the fore, to preserve the confidentiality of the beneficial principal’s will. owner’s information, the client can appoint a nominee Another use of nominee directorships is to meet local Director and nominee Shareholder. The nominees regulations that require some or all company officers to do not sign any contracts on behalf of the company, be residents of that jurisdiction. For example, when the but a Trust Deed and power of attorney will be issued authors set up shell companies in Australia and New Zea- accordingly in favour of the beneficiary. Our Nomi- land, they had to provide local resident directors (natural nee[s] cannot be used for account opening. The sole persons) to satisfy local laws on incorporation. Thus, nomi- purpose of our nominee service is to keep the real nee arrangements are in effect forced on foreign owners of beneficial owner’s information confidential and their companies when the requirement for local resident direc- roles are restricted to that of company formation.”2 tors applies, rather than the owners deliberately seeking out a nominee service (equivalent local requirements may apply for power of attorney arrangements, discussed later It is worth reiterating the point evidenced here about the in this report). This requirement once again underscores tendency of CSPs to offer a cluster of related services the fact that equating of nominee arrangements with (nominee director, nominee shareholder, power of attorney) suspicious activity is highly misleading, especially given that work together. the legitimate uses of such arrangements. However, even Nominee directors employed only for concealment when nominee arrangements are obligatory, they are still are not expected to offer technical expertise or have any prone to abuse in hiding the beneficial owner. substantive relationship with or knowledge of the benefi - A final point that underscores the difficulty of defining cial owner. Instead, nominees simply rent their identity and nominee directors is that in some jurisdictions, beneficial are appointed as the legal officeholders of companies as owners may be legally considered directors with their signatures for sale (Johnson 2016). For example, when the knowledge. An example might be the British Virgin Islands, Panama Papers were released in 2016, they revealed that the single-largest jurisdiction for offshore company Leticia Montoya—a Panamanian employee of Mossack incorporation, which has a proliferation of nominee-like Fonseca—served as the nominee director for “tens of thou- arrangements. A brief by a leading offshore law firm sands” of corporations. For Montoya, her career consisted Signatures for Sale 7 of nothing more than signing documents and issuing her rather than just the jurisdiction of incorporation (unlike identifying documents on behalf of corporations. She was US law, which is more interested in the jurisdiction of paid a yearly salary of $6,000, while Mossack Fonseca incorporation). charged clients $150 annually for a nominee director. She Historically, nominee directors were employed in line did not have any ties to beneficial owners or any corporate with this principle to establish a presence in the UK crown managerial experience other than being listed as such dependencies in order to take advantage of local tax for thousands of companies (Brinkmann, Obermaier, and laws and low tax rates (GSL Law & Consulting 2011). For Obermayer 2016). A more recent brief search of the online example, previously residents of islands such as Sark in database OpenCorporates suggests that Leticia Montoya the English Channel might have made a living by acting as continues to be listed as an active member of manage- nominee directors for hundreds of companies about which ment for more than 16,000 companies in Panama six years they knew almost nothing. After an unfavorable court after the release of the Panama Papers.3 decision in 1999 hindered the practice, some of Sark’s The journalists who broke the Panama Papers scandal nominee directors relocated to other offshore jurisdictions provide an explanation of how nominee directorships (Leigh, Frayman, and Ball 2012). Gibraltar was another worked at Mossack Fonseca, but the details are generally such jurisdiction where local nominee directors and share- applicable for many other providers that continue to holders could be used to establish a local tax presence, operate today. The authors have themselves formed shell even though all a company’s income and business was companies using this form: elsewhere (Doggart 2002, 39). The use of nominee directors to conceal the real owner is by no means limited to offshore centers, however. One of “When a new shell company is set up, sham the authors of this report formed an English shell company [nominee] directors sign three initial docu- for which a CSP provided a nominee director, complete ments that are sent to the true company owners. with a pre-signed but undated letter of resignation and a The first is a waiver declaring they won’t pursue power of attorney agreement. Thus, the author could in claims against the true owners or their companies. effect fire the nominee unilaterally and, if necessary, ret- The second is a power of attorney that ensures the roactively. Each party also agreed to indemnify the other; sham director hands over control of the company to the owner committed not to pursue legal action against the true owner. And the third is the sham director’s the nominee for damage caused to the company or its termination of employment letter, which is signed assets, while the nominee committed to give a reciprocal without a date. This way, true company owners can undertaking. Beyond this, the nominee had no relationship fire their sham directors retroactively at any time. In with the owner, and as the CSP explained, her only role was addition to these three documents, sham directors to prevent the owner from having to reveal his practical sign papers such as the forms required to open control of the company. The author also formed a Nevada a bank account, or the minutes of annual general LLC with a nominee director in Panama City, Panama, meetings.” (Brinkmann, Obermaier, and Obermayer once again for the sole purpose of obscuring the identity of 2016). the beneficial owner. Media coverage amplifies this impression about the use Beyond providing anonymity, nominee directors like of nominee directors in onshore shell companies. Aside Montoya offer utility in derailing investigations. Nominees from the New Zealand and UK examples later in this report, selling their services and using their names on numerous a Canadian nominee was paid $100 for each directorship companies create false trails connecting companies of 200 companies, some involved in criminal activities that have no relation other than using the same nominee worth over $100 million. When deposed for a New York director’s name (FATF and Egmont Group 2018). court case, she described her responsibilities as follows: Nominee directors may be used so a company is considered legally resident within a certain jurisdiction Q. It was just somebody paid you to use your for tax avoidance purposes. This approach is in line with signature and nothing more? the English law test that a company is liable for tax on A. That is correct. the basis of the location of its “mind and management” 8 Signatures for Sale The Risks of Nominee Directorships for Q. Is it literally nothing more? Nominees and Owners A. It’s literally nothing more. The misuse of nominee director arrangements, whereby Q. That you did nothing other than sign papers? nominee directors are purely signatures for sale and do A. Nothing other than signed papers. nothing to fulfill their substantive directorial responsibilities, Q. So you were just a name to put on documents? raises the question of accountability. If nominee directors A. A Canadian director. fail to follow the law on discharging their responsibilities as Q. Did you ever have any concern about the legality directors, why are they not sanctioned? A Global Witness of the documents you were signing? (2012) report on the abuse of UK shell companies is A. No. instructive in answering this question. Q. Why was that? The report shows that in practice (as distinct from laws A. I was receiving them from lawyers. on the books), nominee directors of UK companies can Source: Oved and Cribb 2017 neglect their duties in terms of failing to submit accounts and certify companies as dormant even though tens of The same nominee then signed blank, undated power of millions of pounds are passing through their accounts, attorney forms to allow those unknown parties owning with little to no risk of punishment (Global Witness 2012). the Canadian shell companies to act as they saw fit in This point remains as applicable now as when the report her name without her knowledge, let alone consent (Oved was first published. A crucial point is that this impunity of and Cribb 2017). Given that these arrangements were delinquent nominee directors is especially pronounced if organized by lawyers, they were arguably covered by legal such nominees are not residents of the UK. On the rare professional privilege, even though the nominee director occasions they are questioned, such directors tend to herself was not a lawyer. This Canadian sham graphically make the legally false argument that because they are only demonstrates how the use of straw man nominees is an nominees, they have no responsibility to know anything exercise in formally ceding legal powers over a company to about the company, let alone control its actions. For a third party, and then in a practical sense claiming these example, one Panama-based nominee director of a UK powers back through private legal arrangements. All that is shell company connected with a major corruption scandal left is the facade of the nominee director. in Kyrgyzstan explained to Global Witness: “Yes, I acted as Geoffrey Taylor, the founder of the New Zealand GT nominee director ONLY … but I had no access to their[the Group corporate service provider discussed more fully company’s] daily operations, bank account management or later in this report, marketed his role frankly: “He can act any other activity” (Global Witness 2012, 14). as Director and Shareholder for clients without arousing Regardless of whether the nominees have set up a suspicion that he is a nominee only. In this way he can act private legal agreement with the beneficial owners, a as your front man and attract attention away from you.” For director’s responsibilities cannot be legally transferred. those with aristocratic pretentions, Taylor even offered his Yet whatever the law says, owing to a long-running lack of nominee services in the name of “Lord Stubbington” (Leigh, enforcement by UK authorities, signature for sale nominee Frayman, and Ball 2012). directors of UK companies remain common in practice. Other nominee directors have been infants, dead people, Especially in cases where these nominees are outside the or people whose identities were stolen. For example, UK, they are beyond the reach of UK enforcement. The Global Witness discovered that one nominee director, Yuri mistake of assuming that laws on the books will somehow Voznyak of Kaluga, the Russian Federation, apparently enforce themselves is one of the most important conclu- signed documents for the creation of a UK shell company sions of this report. on April 23, 2008, even though he had in fact died three Somewhat ironically, if the risks of sanctions from the years earlier. When this irregularity was pointed out to authorities for nominee directors of companies involved in the London-based CSP that had formed the company, it criminal activity are slight, the risks posed by these nominees declined any responsibility (Global Witness 2012, 16). The for their principals may actually be greater. Even when the corrupt Nigerian state governor James Ibori listed his nominee is intended to be nothing more than a placeholder, four-month-old child as the director of one of his Nigerian the formal powers of the nominee director create a risk for companies, Saagaris Properties Ltd. (Sharman 2017, 131). the beneficial owner—a nominee director can still exercise Signatures for Sale 9 legal powers that come with directorship. There is very little in of publicly listed companies (OECD 2001). Other legitimate the way of consumer protection for those skirting the bounds uses include political figures placing ownership and control of legality, and even less for those who cross them. The of private assets into trust under the management of others nominees and proxies used by former dictator of the Philip- to limit conflicts of interest while serving in public capacity. pines Ferdinand Marcos to launder his embezzled wealth in However, nominee shareholder arrangements can be Switzerland apparently took control of many of these assets used to perform the now-familiar function of concealing after his death, in defiance of the wishes of the remaining information about the beneficial owner while also ensuring family members (Chaikin and Sharman 2009). that the owner retains practical control of the company. In In justifying nominee directorships to one of the authors cases where only the legal owner is recorded, nominee of this report, a lawyer who had served in this role provided shareholders effectively screen the real owner. For the example of a beneficial owner who had suffered a example, in Australia the nominee’s name appears on the mental breakdown and began issuing instructions that publicly available shareholder register, but the beneficial were obviously detrimental to the interests of the company owner’s name does not. Nominee shareholders commonly and the owner. Drawing on his director’s powers, the have had no responsibility to declare on whose behalf they nominee was able to ignore these instructions until the are holding the shares. owner returned to a sound state of mind. However, the The effect of the rise of public registers of beneficial lawyer failed to consider the reverse scenario: what if the ownership on the popularity of nominee shareholders for nominee director instead of the owner had experienced the privately held shell companies remains to be seen. At least breakdown and begun making decisions that harmed the in theory, beneficial ownership registers look through and company? At the very least, the owner would have faced a disregard the nominee arrangement in recording the identi- long, difficult, and expensive legal battle to reverse these ty of the real (beneficial) owner. Yet the example discussed decisions. The owner could not have had the lawyer’s later in this report of the Cypriot nominee standing in for decisions struck down on the grounds that the director the real owner on the UK People with Significant Control was “just a nominee”: to repeat, a nominee director is a beneficial ownership register brings into question the director, and the creation of nominee arrangements by practical effectiveness of this measure. definition gives real legal powers to the nominees. Beneficial owners thus face a risk in using nominee Corporate Directors and Corporate arrangements, in that legal fictions can take on a life of Shareholders their own, and proxies can begin to exercise power in their Depending on local laws, as legal persons, companies own right. There is thus a basic trade-off between secrecy may be able to serve as directors or shareholders of other and control for those looking to keep their identity hidden companies. The idea of one company owning another is a through the use of corporate structures: more secrecy basic feature of modern capitalism in creating the basis for involves less control, and vice versa. Measures such as parent and subsidiary companies, including those operating pre-signed and undated resignation letters from nominees on a multinational basis. Once again, rather than taking on ameliorate but do not eliminate this risk. this topic on a general basis, this report restricts coverage of corporate directors and corporate shareholders to shell Nominee Shareholders companies and beneficial ownership transparency. A nominee shareholder serves as a named shareholder for As noted earlier, though to the report keeps them sep- a company at the behest of another individual (the princi- arate, corporate directors and corporate shareholders are pal) who exercises real control and reaps the economic sometimes discussed as forms of nominee arrangements. benefit of the company. For example, a lawyer may act as Both types of arrangements can be functionally similar the legal owner of record for a company or certain shares in obscuring the beneficial owner. Whereas a nominee in a company on behalf of the beneficial owner. shareholder who is a real person can at least potentially The primary legitimate use of nominee shareholders be sanctioned for involvement in a criminal scheme, centers on registering shares in the name of a stockbroker sanctions are much more difficult when the shareholder in or other financial services professional, rather than the question is merely another shell company or a trust. buyer or seller, to facilitate efficiency in the clearance and Sometimes, there are very practical reasons for having settlement of trades. This practice primarily occurs in trades a company as a director of another shell company. For 10 Signatures for Sale example, one industry source noted that relying on a single for signature-for-sale nominee directors to hand back (real) person as director can be inconvenient when that practical control of a shell company to the beneficial owner person is on holiday, sick, dead or otherwise unavailable through a private power of attorney agreement. and a decision needs to be made or approved. Conversely, Unlike other nominee services and more esoteric shell if there is a corporate director, one of several authorized company features, the legitimate uses of power of attorney individuals can more easily sign off on decisions as need- are relatively well-known and widely employed. A power of ed. Corporate service providers often have an in-house attorney is granted in a number of instances in which one shell company that may serve as corporate director for a person is not able to make legal decisions, including cases whole suite of other companies formed by that provider. of absence, incapacitation, and deference to another’s Corporate directors and corporate shareholding can be decision making. The authority granted can include used as another tactic to keep the beneficial owner’s name making decisions about estates, buying or selling property, off public records. Thus in correspondence, one provider handling financial matters including bank accounts and from Hong Kong SAR, China, suggested: “Kindly note that other investments, and addressing tax matters. the Directors and Shareholder particular information of In the mystery shopping exercise, it became apparent HK company are open for public search at the Companies that in many countries, foreign owners forming a company Registry page. You may consider to register another faced a legal or practical prerequisite that the local CSP offshore company, like a BVI company, and use it to act as be granted power of attorney. Especially in Eastern the Shareholder of the HK company in order to hide the Europe, this approach was presented as a requirement ownership details.”4 In some cases, there can be a circular of local laws and regulations, rather like the requirement pattern of ownership, whereby company A is owned by for local directors discussed earlier, and not specifically company B, company B by company C, and company C by as a measure to obscure the owner’s identity (though of company A. In these circumstances (which may be illegal course this might be an incidental effect). This requirement in some jurisdictions), there is no real beneficial owner, or seems routine and squares with the fact that a variety of at least control of the companies is exercised separately other routine business transactions in these countries also from ownership. requires a power of attorney arrangement, such as selling Companies can also be used as trustees (such as a property when the owner is outside the country. private trust company), owned by trusts, or combined Despite the widespread legitimate use of power of with civil law foundations. This kind of layering creates attorney, abuses of power of attorney relationships can be long, complex webs of a mix of interlocking corporate used to obscure the identity of the real person in control entities of different types, almost invariably across multiple of a company and corporate bank account in the same jurisdictions. This structure creates serious challenges way as a nominee director. Whereas nominee directors for investigators (OECD 2001). One example concerns can conduct general functions on behalf of an anonymous Mukhtar Ablyazov, targeted by the Kazakh government beneficial owner, a power of attorney arrangement can for alleged fraud associated with BTA Bank, before being be tailored to be broad or narrow in scope. As a private granted political refugee status in France. Following the legal arrangement, it will rarely if ever be referenced in assets in this case necessitated investigating corporate share registries or company documents. Abuses of power structures composed of several thousand linked corporate of attorney are often used in concert with nominee and entities and separate legal action in the British Virgin corporate officeholder arrangements (Wolfsberg Group Islands, England, France, Kazakhstan, Russia, the United 2012). Most relevant for this report, a power of attorney States, and the Seychelles. may be used to complement or create nominee arrange- ments. Thus, the authors corresponded with several CSPs Power of Attorney that suggested that the owner ostensibly grant control of A power of attorney allows a third party the legal prerog- the company to a nominee director, thereby keeping the atives to act on behalf of another within a defined scope owner out of sight, while also suggesting the owner retain of activities. In the context of this report, the person control in practice through a separate power of attorney entrusted with these prerogatives is often a lawyer, and agreement with the nominee. The earlier example of the if so, the power of attorney may be covered by legal CSP offering nominee services for a company from Hong professional privilege. As discussed earlier, it is common Kong SAR, China, illustrates this device. Signatures for Sale 11 Two Examples of the Misuse of Nominee Services T he abuses of nominee arrangements, often in any government agency or intergovernmental organization. conjunction with the other devices noted earlier, This section discusses two examples of the misuse of have been thrust into public attention over the past nominee arrangements. These examples are also relevant decade as a result of a series of prominent leaks. In this in terms of two regulatory responses to the abuse of shell manner, the International Consortium of Investigative companies: the first response centered on tightening the Journalists and those working with them have done more regulation of directors, and the second response centered to enhance the understanding of the misuse of shell com- on a beneficial ownership register. panies, and to promote accountability in this domain, than The GT Group in New Zealand and Tightening of the Law on Directors The first example deals with a particularly notorious pro - authorities quickly discovered she was an unwitting vider of shell companies and nominee services, the GT participant in the international arms trade. In an exam- Group, mentioned briefly earlier. Both the transgressions ple of nominees as signatures for sale, Lu Zhang had and the New Zealand government’s reforms to company recently found part-time employment with the Taylors law in response are instructive. Geoffrey Taylor founded of GT Group serving as a nominee director. For the rate GT Group in 1995 (OCCRP 2011). Since that time, the GT of $15 per signature, the GT Group placed Lu Zhang’s Group has routinely appeared in the headlines for serving name on company documents, thereby obscuring who as the point of contact for those embroiled in scandals was really in control of this and other shell companies including illegal arms deals, drug smuggling, grand (Findley, Nielson, and Sharman 2014). corruption, and tax evasion (Ryle 2011). The corporate shareholder of SP Trading, Vicam Thus, in December 2009, a plane was detained in (Auckland) Limited, which, like SP Trading, listed its Bangkok, Thailand, en route from North Korea to Iran. registered address as care of the GT Group, had at The cargo manifest listed oil drilling equipment as the various points listed several Taylor family members as plane’s contents. However, Thai authorities discovered its directors, though by 2009 the named director was explosives, rocket-propelled grenades, and materials for Nesita Manceau. A brief review of Nesita Manceau the construction of surface-to-air missiles (Worthington, suggests she has been another professional nominee McClymont, and Christodoulou 2020). director working for the GT Group; her name was listed The plane in question—once owned by the arms on OpenCorporates as a director of more than 400 New dealer Viktor Bout, also known as the “Merchant of Zealand companies.7 Further, Vicam (Auckland) Limited Death”—was being leased by the firm SP Trading (Ryle named the GT Group itself as its sole shareholder at the 2011). SP Trading’s incorporation documents listed as time of the investigation into the arms shipment. In July its sole director a recent Chinese immigrant to New 2010, this shareholder was amended to name Nesita Zealand, Lu Zhang, with a single corporate shareholder.5 Manceau the sole shareholder, giving Manceau the dual SP Trading listed its registered address as that of the role of nominee shareholder and nominee director for a GT Group.6 Upon detaining Lu Zhang, New Zealand company embroiled in an international investigation.8 12 Signatures for Sale AP Photo A plane leased by a New Zealand shell company was intercepted in Bangkok, Thailand, in 2019, loaded with weapons and explosives en route from North Korea to Iran. The combination of the nominee director, nominee name and date of birth would be registered. shareholder, and corporate shareholder helped cover the When the authors formed a New Zealand shell compa- trail of the principal who had arranged for the shipment of ny in 2018, they found that foreign nominee and corporate arms from North Korea to Iran. No one in the GT Group or directors were unavailable (with the limited exception of any member of the Taylor family faced charges for their Australian residents) and that local CSPs were unwilling roles in successfully hiding the identity of those behind to act as nominee directors because of the liability they the illegal arms trafficking or providing shell companies bore under the amended laws (FATF and APG 2021, to the Sinaola drug cartel or the Magnitsky case. Pro- 139). In a practical sense, this situation created difficulty vision of nominee directorships and shareholding was for nonresidents to form a New Zealand shell company perfectly legal in New Zealand at the time. In November without a genuine and substantial connection to the 2010, Lu Zhang herself was convicted of 74 counts of country. Corporate service providers were brought within making false statements on company registration forms, the AML reporting regime. More important, the govern- though no penalty was imposed (SPCS 2010). ment set up a 17-member Integrity and Enforcement Significantly, the embarrassment caused by this case Team to check CSPs’ compliance with the new standards and the GT Group’s no-questions-asked provision of shell and to independently investigate suspicious activity in companies more generally spurred the New Zealand line with media coverage, including the misuse of nom- government to undertake important reforms to its com- inee director and nominee shareholder arrangements pany law in 2014. This effort also reflected the European (FATF and APG 2021, 139–40). The use of New Zealand Union’s earlier decision to remove New Zealand from its shell companies in international crime seems to have whitelist of countries with equivalent anti-money-launder- fallen significantly after these reforms, even though the ing (AML) controls in 2011. The amendments mandated amendments affected less than 1 percent of the 550,000 that every new and existing New Zealand company have companies on the register (New Zealand, Office of the a director who was a local resident real individual, whose Minister of Commerce n.d.). Signatures for Sale 13 The Beirut Blast, Cypriot Nominees, and the UK Beneficial Ownership Register On August 4, 2020, an explosion ripped through the heart of Beirut. The source of the explosion was found to be a long-abandoned stash of ammonium nitrate in the port that had been confiscated from the near-derelict ship MV Rhosus in October 2013 (Vasilyeva, Barrington, and Saul 2020). However, from that point on, answers became increasingly difficult to find as officials sought to understand the source of the eight-year-old shipment. A connected group of shell companies whose true owners were obscured by nominees were at the center of the affair (Dark Money Files n.d.). The bill of lading for the MV Rhosus—which sank, seemingly abandoned, in the Beirut harbor in 2018—sug- gests a fairly simple line of transit for the shipment of Hiba Al Kallas/Shutterstock.com ammonium nitrate. The shipper was listed as Rustavi Azot and the consignee as the International Bank of Mozambique on behalf of the commercial explosives company Fábrica de Explosivos de Moçambique (Ruhayem and Adams 2020). Yet, the explosives company explained to investigators that it had actually ordered the ammonium nitrate not from the manufacturer Rustavi The source of the ammonium nitrate that led to a massive explosion Azot, but from a go-between company based in the in Beirut’s port in 2020 was obscured by a UK shell company with a United Kingdom, Savaro Limited (Vasilyeva, Barrington, nominee director. and Saul 2020). The UK company Savaro Limited is listed on the Standing in for the real owner in the register is in viola- People with Significant Control register as being owned tion of UK law on beneficial ownership, yet the likelihood by Marina Psyllou. Psyllou is also listed as the director of sanctions being applied in such situations is extremely for Savaro. Psyllou owns Savaro through being the sole slim. UK enforcement of the register rules has been very shareholder for the company Status Grand Limited (the weak (Bullough 2019), and being in Cyprus, the corporate entity named as the sole shareholder of Savaro).9 A service provider Interstatus Business Services Limited is third Psyllou-controlled company (she is again listed as effectively beyond the reach of UK authorities (somewhat a director and beneficial owner) is Interstatus Limited, ironically, Psyllou is listed as the Compliance Officer for which is listed as the secretary for Savaro. Interstatus is, Interstatus Business Services Limited). in turn, owned by Cypriot Interstatus Business Services. Psyllou is listed on OpenCorporates as a company In addition to the shared connections to Marina Psyllou, officer of at least 159 companies.10 Psyllou is thus a the companies share a single registered and correspon- professional nominee director and nominee shareholder. dence address. Further investigations by the Organized Crime and Despite the information of the UK beneficial ownership Corruption Reporting Project discovered an even more register, however, Marina Psyllou is not the real owner of elaborate web of shell companies, which once again Savaro and had no involvement in or knowledge of the oper- relied on nominee arrangements to hide the real owner ations of the company (Bedford and others 2021). Instead, (Bedford and others 2021). In the case of the Beirut blast, she was operating as a nominee director. She confirmed this means that the true source of the ammonium nitrate that she was acting as a nominee for the real owner in an will likely face no consequences for its role in the events email to journalists in January 2021 (Bergin 2021). of August 4, 2020 (Litvinova 2020). 14 Signatures for Sale Mystery Shopping and the Marketing of Nominee Services I n the course of the mystery shopping exercise, the license photos be submitted as well. This condition authors had a great deal of exposure to the marketing suggests that the CSP would require the nominees listed materials of those who specialize in professional pri- on a new incorporation (likely ones provided by the CSP vacy. This material provides an invaluable insider, applied itself) to provide more information at the time of the guide to what nominee services are available and how they incorporation than if the real owners were doing so. are intended to work. Switching Ownership and Nominee Beneficial Compliant but Secretive: Know Your Owners Customers, but Hide their Identity The extreme instance of a nominee arrangement used This section highlights CSPs who comply with international to conceal the real owner might be the oxymoron of the customer due diligence (CDD) rules, yet openly market nominee beneficial owner service. A nominee beneficial their services as hiding the beneficial owner through owner is a contradiction in terms because one is either nominee and other related services. A recurring theme in a nominee serving the real owner, or the real owner; one the marketing of these businesses is various arguments cannot be both. Nevertheless, both the Panama Papers about property rights and tax freedom. They often openly and the authors’ more recent correspondence with shell espouse the virtues of tax avoidance, but their services company providers show that such services have been and also provide opportunities for tax evasion as well as other still are available. crimes. Mossack Fonseca’s service was daring in its simplicity: One such business pitches its nominee services specif- the real owner would simply give ownership to an individual ically with the assurance, “it doesn’t matter who the front appointed by the Panamanian law firm, who then would man for your corporation is, as long as it’s not you.… Just (hopefully) return it to the original owner (Brinkman, Ober- to keep you assured, our directors are completely ignorant maier, and Obermayer 2016). The advantage here would to the happenings of your corporation. They will never be to break the legal chain of ownership: ultimately, the know who you are, and unless you request it for some spe- original owner would enjoy possession of the company or cial cases, they will have absolutely no information about other asset, while throwing any potential investigators off you” (Panama Offshore Worldwide n.d.). Violations of the the trail by the earlier transfer of ownership to an ostensibly principle that directors are responsible for their company unrelated party. do not come much clearer than this. Mossack Fonseca is defunct, but as the mystery The authors would sometimes receive a seemingly shopping reveals, the sale of nominee beneficial owner compliant response with an attachment that offered a services lives on. The simplest version of this is to incor- variety of services that undermined the probity of response porate the company in the name of one owner, who then received. On the following pagr is a side-by-side compar- later hands control of the company to the real owner. For ison of the text of an email received with a portion of the example, as a provider from Ukraine explained in an email: order form from the same CSP. “Companies in Ukraine are usually established by a specific The order form does indeed have an addendum on natural person/natural persons or is used [sic] a nominee CDD requirements at the end, but the language suggests beneficiary—a citizen of Ukraine who fulfils the instructions that for the sake of incorporation, the documents of the of the real beneficiary. At least the nominee beneficiary nominees would be deemed sufficient. Nominee directors is used in the first stage of the company’s operation and and nominee shareholders are stated to be subject to the then, when the business has already started and a positive additional scrutiny of also requiring passport and driver’s prospect is visible, the nominee beneficiary is replaced by Signatures for Sale 15 “Dear XXXX, Thank you for your inquiry into our company formation services. Please find attached details of our packages and their inclusions as well as prices for incorporation and yearly service thereon. Also attached is a list of our complete services and an order form with instructions also outlining our terms and conditions. There are certain activities and words that are not allowed in Seychelles Business Company Names and Activities so I have attached details. We suggest that if you find us acceptable, then please send us at least two (2) proposed names of the company, by email before completing the order form, so that we may determine if the names are acceptable. Sometimes a compa- ny name has already been taken or it could be too close to an existing company name. Once we receive the completed order form and all the required KYC (Know Your Customer) documents (see on the order form) that we are required to have prior to incorporation, and the payment (bank details at the end of the order form), the company is usually incorporated within 24 hours. The bank account application can only begin after the company has been incorporated as the bank requires certain incorporation documents that we include in our packages (Apart from the Standard Package). Provided that the bank receives the required documents that support a bank application, to their satisfaction, it should be opened with 7–10 working days. As payment is required before incorporation, it can be made by bank transfer or by credit/debit card using our voucher attached. Please let me know if you have any further questions. Kind Regards, XXXX” Source: Banking Bad Data Global Shell Games Correspondence No. 4614 16 Signatures for Sale the real beneficiary.”11 Given that an assessment of wheth- the company. Thanks to the anonymity provided, bearer er the project is working out may take months or years, shares have a long and troubling history of misuse (Blum presumably the real owners might control the company yet and others 1998; OECD 2001). At its plenary meeting in be hidden behind the nominees for some time on Ukraine’s March 2022, the FATF adopted a welcome change to its beneficial ownership register. standard on this issue, prohibiting any new issuance of Showing the widespread use of this approach, a Peruvian bearer shares and bearer share warrants and mandating a CSP replied to an email request to hide the identity of the conversion of existing bearer shares into registered shares, beneficial owner along similar lines: “[We] incorporate the or immobilizing them within a “reasonable” timeframe company and immediately after transfer the ownership of (FATF 2022).14 the shares to the entities/individuals indicated by the client. An even more extreme version of this same strategy We recommend this option given that is the fastest and of a shelf company with nominees was suggested by a most efficient, while obtaining the exact same legal results.”12 CSP operating in the United States and the Seychelles in If the transfer were indeed conducted quickly and official response to a solicitation in the name of one of the main ownership records were also updated equally quickly, then ringleaders identified in the Magnitsky legislation list: the risks of such an arrangement would be low, but delays on either count would mean that the beneficial owner stays “Because your clients are russian citizen and the hidden. Notably, Latin American respondents sometimes banks do not accept russian clients, we suggest to also noted that all their communications and arrangements use full nominee service to set up the company and were covered by legal professional privilege, meaning that open the bank accounts. This is the best solution authorities may have difficulty accessing the information on for you to be safe and confidental [sic]. We have set the creation and subsequent transfer of the company. These up our shelf companies with nominee director and Ukrainian and Peruvian examples are explained on the nominee shareholder and set up each bank account grounds of convenience rather than as part of a deliberate with nominee signatory, so the bank won’t see you ploy to hide the real owner. But even taking this charitable as the beneficiary owner of the account, the bank interpretation, the potential for abuse is clear. can see the nominee beneficiary owner, so you will A more sophisticated approach is to use a professional be full anonym. You can buy one company and use stand-in. When the authors explicitly stated that their fic - the account immediately and avoid the OECD tax titious client wanted to keep the identity of the real owner exchange problem. If you buy any of these company secret, a provider in Vanuatu responded: “As you wanting + bank accounts you will receive all company docu- to keep the beneficial owner details private, the service ments, bank account details, internet login details, of ‘nominee beneficial owner’ would have to be provided user name, password, tokens. So, everything you to the bank, which makes it more difficult and expensive. need to start immediately.”15 The nominee beneficial owner would have to be one of our people in Australia and with good clean reputation. They would have to act as the owner of the business and take on In this example, the corporate service provider did not the risk of all bank transactions. I would estimate USD2800 require proof of identity from the customer, not only for this extra service on top of the company set up fees, in putting it in flagrant violation of international rules, but also addition to .5% of bank account turnover.”13 In this case, the meaning that in effect it had no idea with whom it was provider required the usual suite of identity documents of offering to conspire. the real beneficial owner. In these kinds of cases, the CSP offers to conspire with A Swiss provider offered to sell one of a range of shelf the customer to use nominee services to defeat the banks’ companies first incorporated as far back as 1956 with CDD procedures. These schemes are based on either preexisting bank accounts, coupled with a local nominee the sale of an existing shelf company with an existing director. This service did not come cheap, however, with corporate account or the CSP setting up a company and prices beginning at more than 60,000 Swiss francs. establishing the account, and then transferring ownership Notably, these were bearer share companies, meaning to the customer without informing the bank, which that there is no central register of ownership and, thus, amounts to much the same thing. The bank’s initial CDD that whoever holds the physical share certificates owns check is correct in identifying the true beneficial owner Signatures for Sale 17 of the company at the time the account is set up (that is, be used to beat public registers of beneficial ownership the provider), but it becomes inaccurate as soon as the information. One of the authors was offered a variant of unacknowledged transfer to the customer occurs. Some this tactic when the UK register had the requirement for other providers offered something that could function in only legal, rather than beneficial ownership, information: the same manner, with a nominee signatory service for a the provider was the shareholder of record for the register, corporate bank account. The more usual way of achieving before the shares were then issued to the bearer and trans- this end would be to use a power of attorney agreement. ferred to the author, making the ownership untraceable. This same tactic of the CSP establishing the company How do these types of interactions scale when thousands and then secretly transferring it to the customer could of requests go out to CSPs? 18 Signatures for Sale Data From Audit Study and Field Experiment on Secrecy Services T he following data summarize the responses by CSPs CSP declined to do business with the requester. Because to more than 20,000 inquiries made by the research the report focuses on the proffering of proxy services, it team in 2019 and 2020. A comprehensive list of deemphasizes refusals and concentrates more on the CSPs operating internationally is not available, so the data compliant and noncompliant responses. In a refusal, even analyzed here come from a convenience sample drawn if a nominee service is mentioned, the service is being using systematic internet searches employing a standard- effectively withheld. ized list of key words and the names of countries and other Across 20,079 contacts, if all mentions of nominee, financial jurisdictions. Any CSPs without a web presence local, or resident directors or shareholders are tallied, are thus necessarily missing from the sample. However, the number of offers for nominee services is 473—or 14 if such CSPs were invisible to researchers compiling the percent—of the 3,373 live responses that replied in either sample, then they are likely to be equally invisible to most compliant or noncompliant ways. It is important to under- potential customers operating internationally. score that nowhere in the authors’ correspondence did A conversation is coded as compliant with global they prompt or prime nominee services explicitly. Offers standards when the corresponding CSP or bank requested for nominees came effectively unbidden. photo identification or an in-person visit of the beneficial To compile these data, the authors ran a set of keyword owner or shareholders. Noncompliant responses did not searches on the full texts of the correspondence received require photo ID for the beneficial owner or shareholders. in the course of all inquiries. The text search was based Responses were coded as refusals if, for any reason, the on a library of terms conceived to capture language Table 1. Frequency and Proportion of Secrecy Services Offered across Response Type Outcome Response Noncompliant Compliant Refusal Total Any nominee servicea Frequency 111 287 75 473 Percentage 23.47 60.68 15.86 100.00 Power of attorney or legal professional privilege Frequency 167 269 62 498 Percentage 33.53 54.02 12.45 100.00 Total Frequency 1,454 1,919 2,871 6,244 Percentage 23.29 30.73 45.98 100.00 a. This category includes any offer of nominee director, nominee shareholder, or local or resident director or shareholder. Signatures for Sale 19 that would be used in an offer of a secrecy service to an the beneficial owner, as occurs in a compliant response, inquiry. The search term library is provided in appendix in theory law enforcement authorities have access to the A. In some jurisdictions, to form a company, one must information. This situation should reduce the room for follow regulations that require a resident to be involved. As using nominees to shield criminal activity. Nevertheless, by such, the terms local director or resident shareholder, for using nominees, even compliant CSPs are still helping keep example, are used by a CSP to offer a nominee to fill that their clients’ names off the corporate register and public service. Searches capturing all mentions of nominee, local, records, sometimes very explicitly offering services to get or resident directors or shareholders thus constitute the around disclosure rules. See an example in figure 1. broadest measurement of proxy services used here. The large share of compliant responses among the nominee offers suggests that complying with CDD rules Frequency of Nominee Services by about beneficial owner identification alone does not Response Type prevent CSPs from partaking in the business of selling Table 1 reports the number of offers of nominee and secrecy. It appears to suggest that without also stepping power of attorney services by response type. Note here up enforcement of liability for nominees and greater that CSPs by a large margin offered nominee services transparency of nominee arrangements, current CDD rules while simultaneously demanding photo ID of the beneficial may not be enough to prevent the abuse of shell compa- owner and therefore being categorized as compliant with nies using nominees. international standards. This approach was true across In contrast, the many offers of nominee services that offers of nominee and legal services. flagrantly skirt the rules in the noncompliant category Power of attorney or legal professional privilege is show that there is still a sizable gap between rules on mentioned in 498 of the replies from CSPs, which is 14.8 paper about identification of the beneficial owner and percent of all live responses.16 Interestingly, nominee activity in practice. The greater transparency required by services and power of attorney services are noted in the the new FATF rule changes (discussed later in this report) same CSP response 59 times. In the remainder of the may help increase liability for nominees, and stepping up correspondence, nominee and power of attorney services enforcement will further address the problem. are not mentioned together, suggesting that explicit offers of the two types of services are not predominantly comple- Tests for Treatment Effects of High-Risk mentary. However, failure to mention power of attorney in Inquiries an offer of a nominee service does not necessarily indicate The data were generated through a global audit study and that it would not be employed as part of the arrangement. field experiment. The field experiment involved the random Some means of reasserting control of the company is assignment of experimental conditions systematically necessary in any nominee agreement, whether a power of varying the risk of the contact according to the FATF’s attorney or an effective equivalent, and is therefore implied risk-based approach. This method enables rigorous testing if not explicitly stated. The combination results in 912 of whether or not a treatment that significantly increases responses that mention nominees, a power of attorney, or risk—for instance, demanding secrecy and stipulating up both, 27 percent of all live responses. front that the owner will not reveal his or her identity—also The majority of CSPs offering nominee or legal proxy increases CSPs’ propensity to offer secrecy services such services comply with CDD rules. This large share of as nominee directors or nominee shareholders. compliant responses among the nominee offers provides The treatments reviewed for this report are secrecy, grounds for optimism about the implementation of trans- corruption, terrorism, and Magnitsky. The secrecy treatment parency standards: the majority of CSPs offering such included language in the initial outreach that strongly empha- services made efforts to stay within the law and comply sized an interest in protecting the privacy of the owner of the with reporting rules on beneficial owners rather than cross company to be formed or its bank account. It stated that the the line into illegality. owner of the company would not reveal his identity. However, these CSPs also seem to be effectively offer- The corruption and terrorism treatments both included ing to shield their customers from disclosure on corporate language referencing specific jurisdictions as well as poten- ownership lists and thus keep them out of the public eye. tial red flags (for example, references to employment in inter- Of course, if the CSP collects identifying information on national charity work or work in the sector of government 20 Signatures for Sale Figure 1. Example of CSP Form Showing Prompts for Nominee Shareholder and Nominee Director Full Name ........................................... Address ................................................................................................. COMPANY FORMATION AND DIRECTOR/NOMINEE Nationality ........................................... SHAREHOLDER ORDER FORM Reg. Number ……………..…………………………………. (Only if corporate body) (Individual Clients) [ ] Nominee Director. [ ] Appoint the following as Director(s). Full Name ........................................... Company Name Address ................................................................................................. Nationality ........................................... Kindly Propose 3 IBC names in order of preference: Reg. Number ……………..…………………………………. (Only if corporate body) x .................................................... If there is more than one director, please copy the data fields from above to indicate full information for each x .................................................... director. x .................................................... Company Activities POWERS OF ATTORNEY [ ] Use standard wording of Company activities. No of Power of Attorney ……………………………………… [ ] Use specific wording of Company activities, as specified below: Full Name ............................................... Nationality ............................................... ................................................................................................................................................................................ Personal ID Number …………………………………………………….. ................................................................................................................................................................................ Passport number ............................................... ........................................................................................................... SHARE CAPITAL No of Power of Attorney ……………………………………… Full Name ............................................... [ ] Register standard authorised share capital ($ 50 000). Nationality ............................................... Personal ID Number …………………………………………………….. [ ] Register other amount of authorised share capital: Passport number ............................................... $ .................... divided into .................... shares of $ ........... each ADDRESS OD KEEEPING OF REGISTERS & ACCOUNTS SHAREHOLDERS Please confirm the address where the accounting records of the company will be kept: Please indicate type of shareholder(s) to be appointed: [ ] Nominee Shareholder. ...................................................................... [ ] Bearer [ ] Issue / transfer shares to the following shareholder(s): ......................................................................... No of Shares ........................................... Full Name ........................................... Please confirm the address where the minutes of meetings and resolutions of the company will be Address ................................................................................................. Nationality ........................................... kept: Reg. Number ……………..…………………………………. (Only if corporate body) If there is more than one shareholder, please copy the data fields from above to indicate full information for ...................................................................... each shareholder. ......................................................................... DIRECTORS Please indicate type of director(s) to be appointed: [ ] Director provided by [ ] Appoint the following as Director(s). Please confirm the address where registers of the company will be kept: ...................................................................... ................................................................................................................................................................................ .................................................................................... ......................................................................... BENEFICIAL OWNERS (UBO) Declaration of UBO Full Name ............................................... I, the undersigned, being the beneficial owner of the company hereby declare that none of my or the Nationality ............................................... company’s assets, net worth, income or activities relate in any manner to illegal armaments, money laundering, illegal drugs or other illegal controlled substance, internet gaming, gambling or pornography or any activity that Personal ID Number ……………………………………..... I know to be illegal in my country of citizenship, residence or domicile, and/or in the place of incorporation. Passport number ............................................... I do not intend to hinder, delay or defraud any creditors, or engage in any illegal conduct in relation to creditors and do not intend to engage the services of , in order to facilitate or otherwise engage in Registered Address ………………………………………... such activity. Source of Funding I hereby expressly, specifically and unqualifiedly agree to wholly hold harmless and indemnify for shares in the Company …………………………………………………….. , its shareholders, officers, directors, employees, agents from any liabilities of any kind or character arising out of any lawful actions taken by them in reliance upon any fact of statement contained in If there is more than one UBO, please copy the data fields from above to indicate full information for each this declaration which may hereafter prove to be untrue or materially inaccurate. UBO. OTHER DETAILS Full Name ..................................... Assets held by the Company …………………………………………………….. Telephone ………………………………………….. Estimated Annual Amount of Transactions …………………………………………………….. Fax ………………………………………….. Estimated Annual turnover And value of Company’s Email ………………………………………….. Business .............................................................. .............................................................. .............................................................. Signature ..................................... .............................................................. Details of bank account .............................................................. This information is only for our internal file and will be kept confidential at all times, subject to the applicable laws. This information is NOT part of any public record. We will consider the person(s) indicated in this field to be Details of any other entity (entities) our client(s) and the beneficial owner(s) of the company hereby ordered. We will not take any further instructions Connected to the Company in regards of this company from any other persons except the one(s) indicated here. (Please provide a chart where relevant) .............................................................. .............................................................. .............................................................. OTHER INSTRUCTIONS ................................................................................................................................................................................ ................................................................................................................................................................................ Note: CSP = corporate service provider; IBC = international business company; UBO = ultimate beneficial owner. Signatures for Sale 21 procurement). Such language should imply to the recipient each treatment has a different reference group in the that this potential client may pose increased risk. fully crossed experimental research design. The p -values The corruption treatment originated from nine juris- indicate the probability—if the null hypothesis were true and dictions ranked in the lowest quartile of Transparency no meaningful difference existed—that one might observe a International’s Corruption Perceptions Index. As the name mean difference this large or larger. In essence, it indicates specifies, the index measures perceptions of corruption the likelihood that the difference one sees was produced rather than corruption as such. Nevertheless, in the by random chance. So, smaller p -values indicate that such absence of any credible measure of actual corruption, this a likelihood is diminishing. When p -values drop below 0.05, measure has become the de facto standard in assessing they are generally considered statistically significant. jurisdictional corruption risk. The terrorism treatment Table 2 reports data across three different outcome originated from four jurisdictions perceived to be associat- measures: (a) any mention of nominee, resident, or local ed with the financing of terrorism, though all the difficulties director or shareholder; (b) any mention of only nominee; or associated with measuring corruption risk apply even more (c) any mention of power of attorney or legal professional strongly in assessing terrorism financing risks. privilege. Only one of the experimental treatments seems The Magnitsky treatment was used to test CSPs specifi - to provoke a significant difference compared to placebo. cally for their response to inquiries from researchers using This treatment effect is for the terrorism condition, which names that should by all expectations trigger an enhanced appears to cause a drop in CSPs’ likelihood of mentioning due diligence process. In the Magnitsky treatment, inqui- power of attorney or legal professional privilege. Of course, ries were sent from a set of alias names closely resembling with 12 such significance tests, the likelihood of one being individuals named in the US Department of Treasury’s significant by chance alone is nontrivial, so it is difficult to Global Magnitsky Sanctions list, except the middle initial place too much stock in that sole finding. Still, the treat- was altered. Therefore, these names should have been ment effect merits further investigation. perceived as extreme risks. On the whole, however, a strong demand for secrecy, In statistical analysis, all the treatments are compared company origin in jurisdictions known for corruption, or to innocuous jurisdictions that are widely considered to be explicit mention of names on a high-profile sanctions list low risk. These placebo conditions included no language do not appear to cause appreciable changes in offers of that should have heightened concerns about regulation or secrecy services. The lower number of observations offer- signaled any increased risk such as a demand for secrecy. ing secrecy services may possibly be making the statistical The placebo jurisdictions are Australia, Austria, Denmark, estimates imprecise. In part, this effect can be seen in Finland, the Netherlands, New Zealand, Norway, and figure 2, which plots a bar chart showing the proportion Sweden. All eight countries are very low in perceptions of corruption and terrorism, which makes for a good Figure 2. Frequency of Nominee Services comparison set. However, three of the countries—Austria, Mentioned across Outcomes for the Secrecy and the Netherlands, and New Zealand—have at times drawn Placebo Experimental Conditions criticism for facilitating financial secrecy. Given these concerns, the data were reanalyzed by omitting obser- 0.2 Percentage of providers offering nominees vations for these three jurisdictions and by including the United Kingdom as a substitute placebo jurisdiction. The 0.15 reanalysis produced results substantively similar to those reported in this section. A detailed supplementary analysis can be found in appendix B. 0.1 Table 2 displays the number of observations assigned to placebo and treatment for each of the experimental condi- 0.05 tions, the proportion of observations in each condition that offered the secrecy services, and the p -value for a difference in portions test assessing the statistical significance of the 0 difference between the average values in the placebo and Secrecy demanded Secrecy not demanded treatment conditions. The placebo numbers vary because Noncompliant Compliant Refusal 22 Signatures for Sale Table 2. Frequencies, Proportions, Differences, and Statistical Significance in Differences in Proportions Tests Placebo Placebo Treatment Treatment Outcome N proportion N proportion Difference p -value Nominee, resident, or local director or shareholder mentioned Secrecy 6,923 0.0199 3,361 0.0179 –0.0021 0.471 Corruption 5,885 0.0275 2,484 0.0229 –0.0046 0.230 Terrorism 5,885 0.0275 2,487 0.0237 –0.0038 0.321 Magnitsky 3,401 0.0212 486 0.0123 –0.0088 0.194 Only nominee mentioned Secrecy 6,923 0.0143 3,361 0.0143 –0.0000 0.994 Corruption 5,885 0.0212 2,484 0.0173 –0.0039 0.242 Terrorism 5,885 0.0212 2,487 0.0197 –0.0015 0.652 Magnitsky 3,401 0.0150 486 0.0123 –0.0026 0.649 Power of attorney or legal professional privilege mentioned Secrecy 6,923 0.0266 3,361 0.0226 –0.0040 0.229 Corruption 5,885 0.0296 2,484 0.0250 –0.0046 0.245 Terrorism 5,885 0.0296 2,487 0.0217 –0.0079 0.044 Magnitsky 3,401 0.0271 486 0.0185 –0.0085 0.269 Note: N = number. of nominee services offered across the different out- of the beneficial ownership), this situation does show that comes—noncompliance, compliance, and refusal—for the entity-level compliance with FATF standards does not secrecy and placebo conditions. The confidence intervals, inherently mean that the business is incapable of partic- shown by the gray lines, overlap appreciably, yet the point ipating in the secrecy services business.17 An example estimates indicated by the heights of the bars are never- can be seen in the form supplied by one CSP to a request theless quite closely aligned across treatment and placebo shown in figure 1 above. conditions. Not even the threat of terrorism causes much movement from baseline, with the possible exception of Correspondence with Beneficial Ownership CSPs’ mention of legal secrecy services. Registries Note that compliant responses, while ticking the box One of the more interesting features of the correspon- requiring that clients produce photo ID for the beneficial dence data with CSPs is the relative differences in the owner, sometimes still provide loopholes and workarounds frequencies of offered nominee services across countries for customers’ interests in secrecy. Indeed, nominee with and without mandated beneficial ownership registers. services raise exactly this concern. Although certainly Table 3 reports the categories of secrecy services across better than the parallel situation in the case of a noncom- the two types of countries and shows meaningful differ- pliant response (wherein law enforcement arrives with a ences between the countries with and without beneficial subpoena only to find there is no documentation anywhere ownership registration laws.18 Signatures for Sale 23 Table 3. Nominee and Legal Services Across Country Categories With or Without Beneficial Ownership Registers Beneficial ownership register Service No register Register Total Nominee, resident, or local director or shareholder Frequency 206 267 473 Percentage 43.55 56.45 100.00 Power of attorney or legal professional privilege Frequency 215 291 506 Percentage 42.49 57.51 100.00 Total Frequency 11,696 8,383 20,079 Percentage 58.25 41.75 100.00 Despite accounting for just more than 40 percent of the nominee services to appear jointly. Or something else. observations, CSPs residing in countries with beneficial The nature of the data allows for only speculation at this ownership registers were more likely to offer nominee and point. Nevertheless, the disproportionate appearance of legal shielding services compared to countries without such nominee services in countries requiring registration of registers. This difference is highly significant statistically, beneficial ownership warrants further investigation and though it is important to underscore that this significant policy attention. difference represents an observational correlation and not In a first-cut analysis, this significant difference appears necessarily a causal relationship. Indeed, the authors per- to be driven by the CSPs in the compliant outcome formed a subgroup analysis of offers for nominee services category in which they faithfully demand photo identity confined to only the jurisdictions with beneficial ownership documents of the beneficial owner. The relationship registries. In these jurisdictions, the authors tested the between nominee services is statistically significant in the effects of the secrecy, corruption, terrorism, and Magnitsky compliant category and not for noncompliant responses. treatments described earlier. In all cases, the treatments However, there is also a significant, though smaller, differ- produced no significant differences from placebo in the ence in the refusal category. How are nominee services beneficial ownership jurisdictions, and the results are compensating for, complementing, or otherwise interacting substantively similar to those reported in table 2. with the trend toward registers? Further research is Beneficial ownership registries may create incentives needed. for CSPs to offer nominee services to keep shareholders The distribution of the offers for nominee services out of the public eye, and some of those CSPs then around the world can be seen in appendix C, and table offer these services routinely and indiscriminately to 4 shows the jurisdictions where nominees were most customers. Alternatively, the causality may be reversed: frequently mentioned. Table 4 and maps 1 and 2 show the possibly, governments wanting greater transparency proportion of responses offering nominee services for all in their finance industries in light of frequent nominee jurisdictions from which 10 or more replies were received. services may have been more likely to accede to transna- The global distribution of offers is depicted in map 1 where tional norms promoting registers in the first place. Or a countries are shaded according to the frequency with spurious factor, such as the sophistication of the financial which nominees were offered in those jurisdictions. Map 2 services sector, may have caused both registers and shows a similarly shaded map of the Caribbean basin. 24 Signatures for Sale Table 4. Jurisdictions with the Highest Concentration of Offers for Nominee Services, Jurisdictions with 10 or More Responses Live Nominee Nominee PoA service Country or economy responses service service (%) PoA service (%) Singapore 60 43 72 1 2 Australia 28 20 71 0 0 Cyprus 89 43 48 4 4 Nigeria 26 11 42 0 0 Ireland 35 13 37 1 3 Netherlands Antilles 11 4 36 0 0 Vanuatu 23 8 35 1 4 British Anguilla 12 4 33 1 8 Jersey 16 5 31 0 0 Myanmar 30 9 30 1 3 Panama 64 19 30 5 8 Seychelles 45 13 29 0 0 Gibraltar 30 8 27 0 0 Philippines 15 4 27 0 0 Samoa 19 5 26 2 11 St. Lucia 12 3 25 2 17 Indonesia 54 13 24 13 24 India 38 9 24 0 0 Isle of Man 38 9 24 0 0 Turkey 17 4 24 8 47 Lebanon 18 4 22 2 11 Cayman Islands 36 8 22 0 0 Kazakhstan 24 5 21 5 21 Canada 27 5 19 0 0 Belize 49 9 18 5 10 Malta 28 5 18 1 4 Bangladesh 17 3 18 0 0 Andorra 23 4 17 1 4 Thailand 76 13 17 3 4 Malaysia 30 5 17 0 0 Switzerland 37 6 16 3 8 Netherlands 26 4 15 8 31 St. Vincent and the Grenadines 13 2 15 1 8 China 26 4 15 0 0 Belgium 20 3 15 2 10 Dominica 20 3 15 1 5 Note: PoA = Power of attorney. Only jurisdictions with 10 or more responses are included. Signatures for Sale 25 Map 1. Distribution of Offers for Nominee Services around the World Map 2. Distribution of Offers for Nominee Services in the Caribbean Basin NOMINEE PERCENT 72% 0% THE BAHAMAS NO DATA Cayman Islands (U.K.) British Virgin Islands (U.K.) DOMINICAN REPUBLIC St. Martin (Fr.) BELIZE ST. KITTS & NEVIS DOMINICA ST. LUCIA Curaçao (Neth.) ST. VINCENT & THE GRENADINES BARBADOS COSTA RICA PANAMA 26 Signatures for Sale Comparisons With Mutual Evaluation Reviews H ow does the evidence relating to nominee arrange- The second, closely related point of agreement is the ments, from both the mystery shopping exercises confirmation that a nominee director is still a director, with and the other sources, line up with the formal FATF the same duties and liabilities, even in the case of informal assessment process of mutual evaluation reviews? To what shadow directors. As the evaluation of Hong Kong SAR, degree do FATF evaluations of technical compliance and China notes: “[N]ominee directors are treated as directors effectiveness match what is actually available? This section in law’ (FATF 2019, 142). The New Zealand review states: briefly considers individual evaluations of eight countries “Nominee directors have the same duties as ordinary direc- already mentioned in the report in connection with nominee tors, including acting in good faith and in what they believe services: Australia; Cyprus; Hong Kong SAR, China; New Zea- to be the best interests of the company (section 131 of the land; the United Kingdom; the United States; and Vanuatu. Companies Act). This imposes upon them a duty of care The evaluations tend to confirm the idea that nominee (section 137). Although not explicit, a person who appoints arrangements are a messy cluster of related services, and directs a nominee director would also likely be treated rather than a clear-cut discrete category. For example, as a director under New Zealand law and be subject to the the UK evaluation (FATF 2018, 151–52, 214) discusses same duties” (FATF and APG 2021, 213). As noted earlier, “shadow directors,” defined by section 251 (1) the 2006 the New Zealand government has set up a specialized unit Companies Act as “a person in accordance with whose that, among its other duties, is dedicated to combating the directions or instructions the directors of the company are misuse of nominee arrangements. accustomed to act.” The reference to “accustomed” signals Even though these evaluations are focused on financial that being categorized as a shadow director is a matter crime, they do in passing note the legitimate use of nom- of behaving in a certain way, not a matter of holding an inee arrangements, including stockbrokers and nominee explicit, formal company position, or even signing a private shareholding (FATF 2018, 214). With regard to Australia, agreement such as a power of attorney. Indeed, individuals the evaluation notes that “nominee companies play an can unwittingly fall into the position of being a shadow important role for [stock market] investors in helping them director without knowing or intending to do so. Thus, the to maintain a level of public anonymity, as well as providing FATF evaluation states that although there is no formal flexibility in their investment options” (FATF 2015, 107). provision for nominee directors under UK law, in practice The evaluation of Cyprus by the FATF-style regional they exist, a point supported by research. body for Europe, MONEYVAL (Committee of Experts The US evaluation observes (FATF 2016, 225): “No State on the Evaluation of Anti-Money Laundering Measures expressly permits corporations to use nominee directors; and Financing of Terrorism), seems to be accurate in neither is there an express bar against them.” In fact, the diagnosing first the international banking but then the CSP mystery shopping exercises show that nominee directors sector as the major money laundering risk. Furthermore, are readily available in practice, and that they are explicitly the specific identification of the inherent nominee services marketed as a way to hide the beneficial owner. To make offered by Cypriot providers again is borne out by our matters even worse, many of the intermediaries offering mystery shopping exercises (MONEYVAL 2019, 15–16). such services do not identify their clients. Thus, the However, attention is focused on Cypriot providers acting evaluation is entirely accurate in judging that “[t]here are as nominees for local companies; the bigger problem, no licensing requirements for nominee directors/nominee epitomized by the Beirut blast example discussed earlier, shareholders or requirements for them to disclose the is when Cypriot providers act as nominees for foreign identity of nominator. There are no other mechanisms to companies. As noted, problems here fall in the cracks ensure compliance” (FATF 2016, 225). between different countries’ regulatory regimes. Signatures for Sale 27 A similar cross-jurisdictional instance, but even more The practical outcome of this mismatch of national problematic, comes from Hong Kong SAR, China. The evaluations versus a global problem most relevant for this language of the 2019 fourth round evaluation is reassuring report is that evaluations tend to assume that CSPs are with regard to nominees. The evaluation notes approvingly establishing and managing local companies, even if they that nominee shareholders must be disregarded and the are doing so for foreign beneficial owners. As a result, beneficial owner entered on the Significant Controllers even the comparatively simple structure of a provider in Register (FATF 2019, 144, 213). However, as noted earlier, jurisdiction A selling a company from jurisdiction B to a a Hong Kong SAR, China, provider suggested that one customer in jurisdiction C is generally neglected. And as could relatively easily defeat this measure and keep the real the previous material shows, arrangements that are at owner’s identity hidden by holding ownership through a least as complicated as this example are quite common. second British Virgin Islands company. Evaluations of beneficial ownership standards need to go A similar sense of false security may apply to the highly further in considering and analyzing the multijurisdictional positive 2019 UK evaluation, which concludes that the “risks nature of such arrangements. posed by nominee shareholders are largely mitigated” (FATF It is therefore encouraging that at the FATF Plenary 2019, 215). From the preceding discussion in the evaluation, in March 2022, FATF adopted changes to its rules on the working assumption is clear that it is UK nominees beneficial ownership (Recommendation 24), precisely acting in a UK company for UK-based beneficial owners. requiring a greater awareness of, and focus on, risks Yet as per the example of the shell companies connected emanating from entities with a foreign dimension (FATF with the Beirut blast, the bigger problem may be when a UK 2021b; FATF 2022).19 Where previously FATF required shell company has nominees provided by foreign CSPs who countries to assess the risks of entities incorporated cannot be held accountable by UK authorities. under their own laws, countries will now be required to The final example of the same basic point might be assess the risks of all classes of entities with a sufficient taken from the 2018 third enhanced expedited follow-up link to their jurisdiction, regardless of the law of incorpo- report on Vanuatu by the Asia-Pacific Group on Money ration, and to take measures to mitigate against that risk. Laundering, the FATF-style regional body for the Asia Likewise, under the new rules, competent authorities will Pacific region (APG 2018). Despite being a small, devel- be required to have a mechanism for obtaining beneficial oping country and a classic offshore jurisdiction, Vanuatu ownership information on foreign-created legal persons is notably more compliant with international beneficial with a sufficient link to their country. Previously, this FATF ownership rules than the United States or Australia. Yet rule covered only domestic legal entities created under even when the discussion addresses the offshore sector a country’s own laws. The test for determining which (APG 2018, 17–20), there is a relative lack of imagination foreign entities fall into the “sufficient link” category should in thinking about the multijurisdictional nature of these be based on risks, and examples include foreign entities arrangements. The nominee beneficiary offer from a that have an ongoing business relationship with a local Vanuatu provider discussed earlier (see section titled corporate service provider or have significant real estate “Switching Ownership and Nominee Beneficial Owners”) or other investments in the country. suggests a combined Vanuatu-Australian arrangement Moreover, the new rules are more prescriptive in the that is unlikely to be caught under Vanuatu’s regulations on treatment of nominee relationships. They require countries local nominees. to (a) disclose nominee status and identity of the nomina- The Cyprus and Hong Kong SAR, China, examples illus- tor, and make that disclosure of status public, or (b) license trate the degree to which, so far, evaluations by internation- professional nominees and report the nominee status al organizations focus exclusively on the characteristics and identity of the nominator to the authority tasked with of domestic legal entities and their enforcement, without collecting beneficial owner information, or (c) enforcing a taking into account vulnerabilities of foreign origin (owing prohibition on the use of nominees altogether. Previously, to the legal framework or limited enforcement), when in countries had a wide margin of discretion by adopting fact both money laundering and legitimate finance are unspecified other mechanisms and were thus afforded more and more cross-border and transnational activities. considerable latitude in dealing with this issue, ultimately Not surprisingly, this limitation applies even more strongly resulting in the issue not receiving due attention in evalua- to individual governments and regulators. tion discussions. The changes to FATF’s rule on beneficial 28 Signatures for Sale Table 5. New Glossary Definitions Related to Nominees, FATF Recommendations, updated March 2022 Term Definition Nominator Nominator is an individual (or group of individuals) or legal person that issues instructions (directly or indirectly) to a nominee to act on their behalf in the capacity of a director or a shareholder, also sometimes referred to as a “shadow director” or “silent partner.” Nominee shareholder or Nominee is an individual or legal person instructed by another individual or legal person director (“the nominator”) to act on their behalf in a certain capacity regarding a legal person. A Nominee Director (also known as a “resident director) is an individual or legal entity that routinely exercises the functions of the director in the company on behalf of and subject to the direct or indirect instructions of the nominator. A Nominee Director is never the beneficial owner of a legal person. A Nominee Shareholder exercises the associated voting rights according to the instructions of the nominator and/or receives dividends on behalf of the nominator. A nominee shareholder is never the beneficial owner of a legal person based on the shares it holds as a nominee. Source: FATF 2022. ownership also, for the first time, explicitly spell out what introduction of definitions of nominee director, nominee beneficial owner identification means in situations where a shareholder, and nominator to the glossary of the FATF nominee director or nominee shareholder controls a legal Recommendations for the first time (see table 5). One entity; stating that it “requires establishing the identity of can hope that these changes in the international rules will the natural person on whose behalf the nominee is ulti- effect change in the ways in which nominee relationships mately, directly or indirectly, acting” (FATF 2021b, 8 n.17). are abused. As noted, a change in rules will have limited A final important element of the revision of the rules effect if there is not due attention to the enforcement of on nominees under Recommendation 24 is also the those rules. Signatures for Sale 29 Conclusions and Recommendations T he evidence presented in this report demonstrates final element of the previous section about the need for that effective regulation of nominee arrangements more multijurisdictional thinking. is critical to the transparency of beneficial owner- Over its now 30-year history, the AML policy community ship. Currently, the lack of attention to the potential and has spent much more time and effort composing and actual abuses of nominee arrangements constitutes a diffusing formal rules than it has assessing whether these major vulnerability in the ongoing campaign to curb the rules actually make any difference. According to senior use of untraceable shell companies in financial crime. FATF officials’ recent public statements, the result of this For example, without proper attention to enforcing the proclivity is a sharp disjuncture between widespread for- transparency of nominee arrangements, beneficial malistic tick-box compliance with AML rules and relatively ownership registers will not achieve their aims. This brief low practical effectiveness. For example, referring to banks concluding section is devoted to sketching some of the as the lynchpin of the AML system, the FATF Executive main implications of the report. Secretary commented, “[w]hen we look at the measures, First, rather than being marginal or peripheral to the the preventative measures that we expect banks to take ... broader beneficial ownership agenda, nominee arrange - There’s a 100% failure rate.... [A]ll too often it just becomes ments are an important part of it. Given that 14 percent of a tick-box process.”20 the live responses to the thousands of email solicitations This evidence is a stark reminder that beneficial for shell companies offered nominee arrangements ownership rules and those relating to nominees do not unprompted indicates that such arrangements are very enforce themselves. This point applies in particular to common, generic, and quite cheap. Thus, even without beneficial ownership registers; absent enforcement, there specifically requesting such services, those shopping is no reason to expect that legally requiring all beneficial for shell companies are likely be directed to nominee owners to declare their true identities will make them do services by providers, who often explicitly market these so. Rather than being alternatives, stronger controls on arrangements as a device to conceal the identity of CSPs and better regulation of nominee arrangements are the beneficial owner. If nominee services are common, both necessary underpinnings of successful beneficial they are especially prevalent among the most problem- ownership registers. The same is true in ensuring that atic parts of the company formation industry (such as directors, including nominees, fulfill their legal duties and Mossack Fonseca and GT Group) and in cases where ensuring that those that do not are penalized. shell companies have been used in money laundering and Rather than a counsel of despair, both the qualitative related crimes (as the earlier case studies demonstrate). and the quantitative evidence in the report provide Furthermore, nominee arrangements can be combined examples of how governments can and have made major with powers of attorney to maximize beneficial owners’ improvements in practical effectiveness. New Zealand’s control while minimizing their public profile. Once again, substantial investment in enforcement is a recent positive it is doubtful that policy makers have given sufficient development. Even those providers that are most open in priority to either of these services in their designing and offering to veil the beneficial owner using nominee direc - enforcing of beneficial ownership standards. tors, nominee shareholder arrangements, or both more The next two points may seem too obvious to be merit often than not verify the customer’s identity. Twenty years mentioning, yet they are perhaps the most fundamental ago, it is much less likely that they would have done so. vulnerabilities. The first point is the distinction between Worries about a dark side of globalization, the declin- the rules on the books and the practical enforcement and ing salience of national boundaries in the face of a tide of effectiveness of those rules. The second point takes up the internationally mobile capital, and individual governments’ 30 Signatures for Sale inability to combat cross-border flows of dirty money out only a very simple structure, which ignores the fact in isolation were crucial for the creation of the FATF. that the associated corporate bank account will often Yet the tacit assumption in the AML policy community be in a different jurisdiction again. The very reason that seems to be that as long as individual jurisdictions shell companies with nominees pose such a danger is are compliant with the rules, then multijurisdictional because of their inherently multijurisdictional nature. If the corporate structures that span these jurisdictions must disconnect between technical compliance and practical also be compliant. With regard to nominee services and effectiveness is now a welcome talking point in the AML shell companies (and probably much else besides), this policy community, then the disconnect between single-ju- presumption is wrong. risdiction rules and multijurisdictional problems now needs Even if countries A, B, and C are fully compliant with equal attention. One can hope that the recent change in beneficial ownership rules, a shell company incorporated in the FATF rules on beneficial ownership of legal entities jurisdiction A, by a provider using nominees in jurisdiction (Recommendation 24) will force a change in that direction, B, for a beneficial owner in jurisdiction C, may well be by obliging countries to take into account the risks posed opaque and untraceable. And this example sketches by foreign legal entities. Signatures for Sale 31 Notes 1 Offer by U.S. corporate service provider to authors, 2020. 2 Correspondence from corporate service provider in the Oceania region to authors, 2020. 3 Information obtained from a search for “Leticia Montoya” on the OpenCorporates website. See https://opencorporates.com/ officers?jurisdiction_code=&q=Leticia+Montoya&utf8=%E2%9C%93. 4 Correspondence from corporate service provider to authors, 2020. 5 Information obtained from a search for “SP Trading Limited” on the Companies Office, Government of New Zealand, website. See https:// app.companiesoffice.govt.nz/companies/app/service/services/documents/297748C743057D9AAC2963C2501E465D. 6 Information obtained from a search for “SP Trading Limited” on the OpenCorporates website. See https://opencorporates.com/ companies/nz/2289331. 7 Information obtained from a search for “Nesita Manceau” on the OpenCorporates website. See https://opencorporates.com/officers/ nz?q=Nesita+MANCEAU. 8 Information obtained from a search for “Vicam (Auckland) Limited” on the OpenCorporates website. See https://opencorporates.com/ companies/nz/1184865. 9 Information obtained from a search for “Statue Grand Limited” on the OpenCorporates website. See https://opencorporates.com/ companies/cy/HE113203. Additionally, this is based on the fact that Psyllou is named as PSC (‘People with Significant Control’) for Savaro, and Status Grand Limited is the shareholder for Savaro. As such, the rules of Companies House dictate via “pass through” that Psyllou is the PSC . 10 Information obtained from a search for “Marina Psyllou” on OpenCorporates website. See https://opencorporates.com/ officers?q=MARINA+PSYLLOU. 11 Correspondence from corporate service provider to authors, 2020. 12 Correspondence from corporate service provider to authors, 2020. 13 Correspondence from corporate service provider to authors, 2020. 14 Public Statement on Revisions to R.24 (04 March 2022). Paris: FATF. https://www.fatf-gafi.org/publications/fatfrecommendations/ documents/r24-statement-march-2022.html 15 Correspondence from corporate service provider to authors, 2020. 16 This is almost entirely driven by offers of power of attorney, because legal professional privilege is noted in only 26 of the responses. 17 Banking Bad Data Hybrid Correspondence No. 1525 18 The list of countries with beneficial ownership registers was drawn from Harari et al. 2020, p. 19. This is a broad definition of BO registers. The list includes 81 jurisdictions that had, as of April 2020, laws requiring registration of beneficial ownership information. As noted by the authors, the list also includes “countries whose beneficial ownership laws have loopholes or where bearer shares still pose risks (e.g. Germany, Czechia).” 19 Public Statement on Revisions to R.24 (04 March 2022). Paris: FATF. https://www.fatf-gafi.org/publications/fatfrecommendations/ documents/r24-statement-march-2022.html 20 David Lewis, FATF (Financial Action Task Force), Executive Secretary, interview by Martin Woods and Stephen Platt. Podcast KYC360, November 18, 2020. Transcript available at https://kyc360.riskscreen.com/podcast/david-lewis-executive-secretary-fatf/. 32 Signatures for Sale References APG (Asia-Pacific Group on Money Laundering). 2018. Third Enhanced Expedited Follow-Up Report: Mutual Evaluation Report of Vanuatu. Paris: FATF Bedford, Audrey, Yanina Korniienko, Isobel Koshiw, Feras Hatoum, and Stelios Orphanides. 2021. “Ownership of Chemicals That Exploded at Beirut Port Traces Back to Ukraine.” Organized Crime and Corruption Reporting Project, September 14. https://www.occrp.org/en/investigations/ownership-of-chemicals-that-exploded-at-beirut-port-traces- back-to-ukraine. Bergin, Tom. 2021. “British Lawmakers Seek Investigation into UK-Registered Firm Possibly Linked to Beirut Blast,” Reuters, January 22, 2021. https://www.reuters.com/article/uk-lebanon-crisis-blast-britain-idAFKBN29S014. Blum, Jack, Michael Levi, R. T. Taylor, and Phil Williams. 1998. Financial Havens, Banking Secrecy and Money Laundering. New York, USA: UN. Boros, Elizabeth. 1989. “The Duties of Nominee and Multiple Directors.” Company Lawyer 10: 211–19. Brinkmann, Bastian, Frederik Obermaier, and Bastian Obermayer. 2016. “The Secret World of Sham Directors,” Süddeutsche Zeitung, April 18. Brown, Matthew. 2019. “Shadow Directors in the BVI: Who Are They, What Duties Do They Owe and What Are Their Risks.” Conyers Dill & Pearman, Hamilton, Bermuda. https://www.conyers.com/wp-content/uploads/2019/03/2019-03-BVI- Article-Shadow-Directors.pdf. Bullough, Oliver. 2019. “How Britain Can Help You Get Away with Stealing Millions: A Five-Step Guide,” The Guardian, July 5, https://www.theguardian.com/world/2019/jul/05/how-britain-can-help-you-get-away-with-stealing-millions- a-five-step-guide. Chaikin, David, and J. C. Sharman. 2009. Corruption and Money Laundering: A Symbiotic Relationship. London: Palgrave Macmillan. Dark Money Files. n.d. “British Shells and the Beirut Blast.” https://www.linkedin.com/posts/the-dark-money-files- ltd_british-shells-and-the-beirut-blast-activity-6756604108947378176-N2kH. Doggart, Catherine. 2002. Tax Havens and Their Uses. London: Economist Intelligence Unit. EBRD (European Bank for Reconstruction and Development). 2020. “EBRD Use of Nominee Directors.” Approach Report, Evaluation Department, London, May. FATF (Financial Action Task Force), 2022. International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation: The FATF Recommendations. Updated March 2022. Paris: FATF. FATF (Financial Action Task Force). 2021a. International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation: The FATF Recommendations. Updated October 2021. Paris: FATF. FATF (Financial Action Task Force). 2021b. Revisions to Recommendation 24 and the Interpretive Note—Public Consultation. Paris: FATF. Signatures for Sale 33 FATF (Financial Action Task Force) and APG (Asia-Pacific Group on Money Laundering). 2021. Anti–Money Laundering and Counter-terrorist Financing Measures: New Zealand Mutual Evaluation Report. Paris: FATF. FATF (Financial Action Task Force). 2019. Anti-Money Laundering and Counter-terrorist Financing Measures: Hong Kong, China, Fourth Round Mutual Evaluation Report. Paris: FATF. FATF (Financial Action Task Force). 2018. Anti-Money Laundering and Counter-terrorist Financing Measures: United Kingdom Mutual Evaluation Report. Paris: FATF. FATF (Financial Action Task Force) and Egmont Group. 2018. Concealment of Beneficial Ownership. Paris: FATF. FATF (Financial Action Task Force). 2016. Anti-Money Laundering and Counter-terrorist Financing Measures: United States Mutual Evaluation Report. Paris: FATF. FATF (Financial Action Task Force). 2015. Anti-Money Laundering and Counter-terrorist Financing Measures: Australia Mutual Evaluation Report. Paris: FATF. Findley, Michael G., Daniel L. Nielson, and J. C. Sharman. 2014. Global Shell Games: Experiments in Transnational Relations, Crime, and Terrorism. Cambridge: Cambridge University Press. Global Witness. 2012. Grave Secrecy: How a Dead Man Can Own a UK Company and Other Hair-Raising Stories about Hidden Company Ownership from Kyrgyzstan and Beyond. London: Global Witness. GSL Law & Consulting. 2011. Offshore for Beginners. Moscow: GSL Law & Consulting. http://offshori.com/ nominee-service. Harari, Moran, Andres Knobel, Markus Meinzer, and Miroslav Palanský. 2020. “Ownership Registration of Different Types of Legal Structures From an International Comparative Perspective. State of Play of Beneficial Ownership-Update 2020.” Tax Justice Network Report. State of Play of Beneficial Ownership-Update. Johnson, Tim. 2016. “Did This Panama Papers Housekeeper Really Direct a North Korean Arms Deal?,” Sacramento Bee, May 10. Lee, Pey Woan. 2003. “Serving Two Masters: The Dual Loyalties of the Nominee Director in Corporate Groups.” Journal of Business Law 2003 (5): 449–69. Leigh, David, Harold Frayman, and James Ball. 2012. “‘Fatal Blow against Sham Corporate Directors Not So Fatal after All.” International Consortium of Investigative Journalists, Washington, DC. https://www.icij.org/investigations/offshore/ nominee-directors/. Litvinova, Daria. 2020. “Captain Astonished That His Ship Delivered Beirut Explosive,” Washington Post, August 6. MONEYVAL (Committee of Experts on the Evaluation of Anti-Money Laundering Measures and Financing of Terrorism). 2019. Anti-Money Laundering and Counter-terrorist Financing Measures: Cyprus Fifth Round Mutual Evaluation Report. Paris: FATF. New Zealand, Office of the Minister of Commerce. n.d. “Misuse of New Zealand Companies and Limited Partnerships.” https://www.mbie.govt.nz/assets/be173d0c00/misuse-of-nz-companies-and-limited-partnerships.pdf. OCCRP (Organized Crime and Corruption Reporting Project). 2011. “Offshore Registration Business Halts Operations.” https://www.occrp.org/en/investigations/930-offshore-registration-business-forced-to-halt-operations. OECD (Organisation for Economic Co-operation and Development). 2001. Behind the Corporate Veil: Using Corporate Entities for Illicit Purposes. Paris: OECD. 34 Signatures for Sale Oved, Marco Chown, and Robert Cribb. 2017. “Signatures for Sale: Paid to Sign Corporate Documents, Nominee Directors Serve to Hide Companies’ Real Owners,” Toronto Star, January 26, https://projects.thestar.com/panama-papers/ canada-signatures-for-sale/. Panama Offshore Worldwide. n.d. “Nominee Directors: Do They Have Control?” https://panama.offshoreww.com/ nominee-directors-do-they-have-control. Phillips, Richard, Hannah Petersen, and Ronen Palan. 2021. “Group Subsidiaries, Tax Minimization and Offshore Financial Centres: Mapping Organizational Structures to Establish the ‘In-Betweener’ Advantage.” Journal of International Business Policy 4 (2): 286–307. Ruhayem, Rami, and Paul Adams. 2020. “The Inferno and the Mystery Ship,” BBC News, August 8. https://bbc.co.uk/ news/extra/x2iutcqf1g/beirut-blast. Ryle, Gerard. 2011. “Inside the Shell: Drugs, Arms, and Tax Scams,” Sydney Morning Herald, May 15. Sharman, J. C. 2017. The Despot’s Guide to Wealth Management: On the International Campaign against Grand Corruption. Ithaca: Cornell University Press. SPCS (Society for Promotion of Community Standards). 2010. “Lu Zhang Convicted: SP Trading Ltd and False Residential Address.” https://spcs.org.nz/lu-zhang-convicted-sp-trading-ltd-and-false-residential-addresses. Vasilyeva, Maria, Lisa Barrington, and Jonathan Saul. 2020. “Who Owned the Chemicals That Blew up Beirut? No One Will Say,” Reuters, August 11. Wolfsberg Group. 2012. “The Wolfsberg AML Principles: Frequently Asked Questions with Regards to Intermediaries and Holders of Powers of Attorney and Authorized Signers in the Context of Private Banking.” Wolfsberg Group, Ermatingen, Switzerland. Worthington, Elise, Alison McClymont, and Mario Christodoulou. 2020. “The FinCEN files: Dirty Little Secrets of the World’s Banks Revealed in Mass US Government Leak,” ABC News, September 20. Signatures for Sale 35 Appendix A: Search Term Library Category Search termsa Nominee Director w/ Local & Resident nominee dir* local dir* resident dir* Nominee Share w/ Local & Resident nominee ben* nominee shar* local shar* resident shar* Power of Attorney power of attorney PoA Legal Professional Privilege legal professional priv a. All search terms were coded to be non-case sensitive. 36 Signatures for Sale Appendix B: Difference in Proportions Tests for Mention of Secrecy Services  xperimental results with the United Kingdom instead of Austria, the Netherlands, E and New Zealand for Placebo Placebo Placebo Treatment Treatment Outcome N proportion N proportion Difference p -value Nominee, resident, or local director or shareholder Secrecy 5,052 0.0214 3,361 0.0179 –0.0035 0.258 Corruption 6,356 0.0264 2,484 0.0229 –0.0035 0.350 Terrorism 6,356 0.0264 2,487 0.0237 –0.0027 0.469 Magnitsky 5,052 0.0214 486 0.0123 –0.0090 0.180 Only nominee Secrecy 5,052 0.0158 3,361 0.0143 –0.0016 0.568 Corruption 6,356 0.0200 2,484 0.0173 –0.0027 0.411 Terrorism 6,356 0.0200 2,487 0.0197 –0.0003 0.933 Magnitsky 5,052 0.0158 486 0.0123 –0.0035 0.552 Power of attorney or legal professional privilege Secrecy 5,122 0.0266 3,361 0.0226 –0.0039 0.256 Corruption 6,634 0.0282 2,484 0.0250 –0.0032 0.400 Terrorism 6,634 0.0282 2,487 0.0217 –0.0065 0.086 Magnitsky 5,052 0.0267 486 0.0185 –0.0082 0.278 Note: N = number. Signatures for Sale 37 Appendix C: Frequency of Mentions of Nominee Services by Jurisdiction of Service Provider  entions of nominee services/power of attorney (PoA) in correspondence with service providers; M jurisdictions with 10 or more responses Live Nominee Nominee PoA service Country or economy responses service service (%) PoA service (%) Singapore 60 43 72 1 2 Australia 28 20 71 0 0 Cyprus 89 43 48 4 4 Nigeria 26 11 42 0 0 Ireland 35 13 37 1 3 Netherlands Antilles 11 4 36 0 0 Vanuatu 23 8 35 1 4 British Anguilla 12 4 33 1 8 Jersey 16 5 31 0 0 Myanmar 30 9 30 1 3 Panama 64 19 30 5 8 Seychelles 45 13 29 0 0 Gibraltar 30 8 27 0 0 Philippines 15 4 27 0 0 Samoa 19 5 26 2 11 St. Lucia 12 3 25 2 17 Indonesia 54 13 24 13 24 India 38 9 24 0 0 Isle of Man 38 9 24 0 0 Turkey 17 4 24 8 47 Lebanon 18 4 22 2 11 Cayman Islands 36 8 22 0 0 Kazakhstan 24 5 21 5 21 Canada 27 5 19 0 0 Belize 49 9 18 5 10 Malta 28 5 18 1 4 Bangladesh 17 3 18 0 0 Andorra 23 4 17 1 4 38 Signatures for Sale Live Nominee Nominee PoA service Country or economy responses service service (%) PoA service (%) Thailand 76 13 17 3 4 Malaysia 30 5 17 0 0 Switzerland 37 6 16 3 8 Netherlands 26 4 15 8 31 St. Vincent and the Grenadines 13 2 15 1 8 China 26 4 15 0 0 Belgium 20 3 15 2 10 Dominica 20 3 15 1 5 Israel 21 3 14 2 10 Mauritius 35 5 14 1 3 British Virgin Islands 42 6 14 1 2 Liechtenstein 15 2 13 0 0 New Zealand 15 2 13 0 0 United Kingdom 46 6 13 1 2 Estonia 32 4 13 17 53 Kenya 32 4 13 0 0 Pakistan 25 3 12 3 12 Serbia 18 2 11 10 56 Marshall Islands 18 2 11 1 6 Bahamas 18 2 11 0 0 Slovak Republic 39 4 10 8 21 Cabo Verde 10 1 10 1 10 Armenia 10 1 10 0 0 Poland 32 3 9 16 50 Russian Federation 54 5 9 13 24 Hong Kong SAR, China 87 8 9 0 0 Kuwait 11 1 9 4 36 Rwanda 11 1 9 4 36 Bulgaria 66 6 9 13 20 Sweden 11 1 9 0 0 Guernsey 23 2 9 0 0 Hungary 48 4 8 1 2 Sint Maarten 13 1 8 2 15 Curacao 13 1 8 1 8 St. Kitts and Nevis 26 2 8 1 4 Brunei Darussalam 13 1 8 0 0 Ukraine 53 4 8 18 34 Montenegro 28 2 7 11 39 Czech Republic 42 3 7 8 19 Signatures for Sale 39 Live Nominee Nominee PoA service Country or economy responses service service (%) PoA service (%) Bosnia and Herzegovina 15 1 7 7 47 Portugal 16 1 6 3 19 Tunisia 16 1 6 3 19 Albania 16 1 6 2 13 Azerbaijan 17 1 6 7 41 Sri Lanka 17 1 6 2 12 Vietnam 17 1 6 1 6 Luxembourg 18 1 6 2 11 United States 159 7 4 2 1 Ghana 23 1 4 5 22 United Arab Emirates 56 2 4 3 5 Costa Rica 35 1 3 0 0 Lithuania 37 1 3 12 32 Egypt, Arab Republic of 38 1 3 9 24 Georgia 18 0 0 9 50 Moldova 13 0 0 6 46 Peru 14 0 0 6 43 Belarus 12 0 0 4 33 Norway 10 0 0 3 30 Saudi Arabia 14 0 0 4 29 Greece 12 0 0 3 25 El Salvador 18 0 0 4 22 Germany 23 0 0 5 22 Austria 20 0 0 4 20 Iran, Islamic Republic of 11 0 0 2 18 Mexico 23 0 0 4 17 Romania 35 0 0 6 17 Morocco 14 0 0 2 14 Qatar 15 0 0 2 13 Dominican Republic 10 0 0 1 10 Mongolia 11 0 0 1 9 Namibia 11 0 0 1 9 Colombia 24 0 0 2 8 France 13 0 0 1 8 Bahrain 15 0 0 1 7 Tanzania 16 0 0 1 6 Macao SAR, China 27 0 0 1 4 Barbados 10 0 0 0 0 Cambodia 12 0 0 0 0 40 Signatures for Sale Live Nominee Nominee PoA service Country or economy responses service service (%) PoA service (%) Canary Islands 13 0 0 0 0 Congo, Democratic Republic 11 0 0 0 0 Iraq 10 0 0 0 0 Latvia 13 0 0 0 0 Nepal 10 0 0 0 0 Oman 11 0 0 0 0 Uruguay 47 0 0 0 0 Note: PoA = Power of attorney. Signatures for Sale 41 star.worldbank.org @returningassets