Third party companies are only as trustworthy as the people who run them; our analysis showed that it is a company's directors, shareholders or ultimate beneficial owners who have the biggest impact on risk.
Negative information on individuals running or owning a company accounted for sixty-eight percent of red flagged reports in the financial services industry since 2009.
David Eastwood, Forensic Partner, said:
“Fraudsters pose, in equal measure, the most sinister and most clandestine of risks which banks must be alert to when entering into business arrangements. In many jurisdictions it can be a challenge to accurately identify shareholders and ultimate beneficial owners. This information is often not readily available on corporate filings and the use of proxy or nominee shareholders or bearer shares can confuse matters. However, regulators have made it clear that financial institutions should seek to unmask the individuals behind the organisations they deal with; ultimately it is people that pay or receive bribes, launder money or commit fraud, not legal entities.”
While businesses face commercial pressure to tap into growth areas, the benefits can be quickly outweighed by regulatory fines and sanctions if things go wrong. While many are doing their best to compete in the new world, too many are still overlooking the risks.