Tax evasion, money laundering: Limited cos, LLPs and trusts most vulnerable sectors: SECP

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) said the limited companies, limited liability partnerships, and trusts are the most vulnerable sectors where tax evasion and money laundering is taking place.

In a report on 'Ultimate Beneficial Owner,' the SECP said the requirement to maintain UBO information is aimed at determining the true owners of a company who can only be natural persons.

Corporate vehicles such as limited companies, limited liability partnerships and trusts, etc are at the heart of many tax evasion and money laundering schemes as activities are not carried out in the name of real/natural persons, but by 'legal persons' instead behind whom real controlling persons are concealed by the corporate veil.

The SECP stated that the UBO information is necessary to detect and prevent tax evasion, corruption, money laundering, terrorist financing and other illicit behaviors involving one or more companies or legal persons.

Public trust in companies and markets largely depends on the existence of an accurate disclosure regime that provides transparency in the beneficial ownership and control structures of companies.

The UBO information assists financial institutions in applying adequate customer verification procedures before commencement of the relationship with their customers.

This is also likely to assist the companies themselves in understanding their ultimate owners/controllers where there are complex corporate ownership and/or control structures.

Different authorities may have a recognisable legal interest in obtaining information on UBO and control in order to investigate suspected illicit activities.

Law enforcement authorities investigating and prosecuting money laundering and other crimes, tax authorities verifying compliance with tax laws, and securities regulators investigating market manipulation, unlawful insider trading, and fraud are just some of the authorities who may require information on UBO and control.

Courts may also need such information in the context of litigation cases. Legal and beneficial ownership information can assist law enforcement and other competent authorities by identifying those natural persons who may be responsible for the underlying activity of concern, or who may have relevant information to further an investigation, the SECP added.

Copyright Business Recorder, 2020