EXPLORING UK COMPANIES’ LEGAL OWNERSHIP CHAINS TO DETECT RED FLAGS AND VERIFY BENEFICIAL OWNERSHIP INFORMATION

On 6 July, the Tax Justice Network announced that it, in cooperation with the CORPNET group at the University of Amsterdam and the Data Analytics and Society Centre for Doctoral Training at the University of Sheffield has mined and applied advanced analytics to Orbis data to identify patterns and red flags on the ownership chains of UK companies.  It says that the findings include that –

  • 74% of UK companies have very simple structures (a natural person directly owning the company or just one intermediary entity in between;
  • only 5% of UK terminal companies have more than 5 layers; and
  • only 0.5% have more than 10 layers.

These findings, it says, were consistent with what the OECD Global Forum peer review report in 2018.  However, it says, 2 UK companies of its sample had 23 layers of intermediary entities up to a natural person shareholder.

It makes the sensible proposal that, to be able to detect anomalies and possible problems, it is necessary to know what a typical company looks like. For example, do most companies have 1, 2 or 10 shareholders? How are shareholdings allocated among shareholders, equal distribution (50-50 split, 33-33-33 split or 99-1 split)? How many layers are present in the ownership chain?  Therefore, TJN produced an analysis of UK companies’ legal ownership chains, but Companies House’s legal ownership data was not sufficient for the purposes of the analysis.

The article mentions the various issues the survey encountered, saying that the lack of verification and enforcement on beneficial ownership data, allows companies to declare an entity, instead of a natural person, as a beneficial owner. It also says that the lack of open data format for companies’ legal ownership information, makes it very hard to track the ownership chain of companies.

The next part of this project will include an analysis of the country of incorporation of most layers of UK terminal companies.

tjn

https://www.taxjustice.net/2020/07/06/exploring-uk-companies-legal-ownership-chains-to-detect-red-flags-and-verify-beneficial-ownership-information/

 

 

 

 

 

 

 

 

 

 

 

 

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Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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