Secrecy Jurisdictions
When an asset’s ownership isn’t always so secret
When a debtor has an English High Court judgement for USD 30 million against them, an obvious target for enforcement is the USD 125 million house in London they allegedly own. But what can you do if the registered owner of the house is an offshore company? It may seem like the trail has run cold. But it is still possible to gather compelling evidence of a property’s ultimate beneficial ownership.
Imagine a multi-million dollar home in Knightsbridge, a neighbourhood of London favoured by ultra-high-net-worth individuals. The owner on the title deed is a UK-registered company, whose ownership details are readily accessible. So far, so transparent. That company’s shareholders are a further four companies, incorporated between Cyprus and Guernsey. Cypriot companies are obliged to reveal their shareholders; however, in this case, they are owned by the partner of a Cypriot law firm and companies registered in Bermuda, where limited disclosure requirements mean shareholding information is unavailable to the public. Nor much luck in Guernsey, where the company shareholders are also lawyers at a local law firm.
UK Companies House requires companies to declare all beneficiaries holding over 25%. But because the four shareholders of the UK company that owns the Knightsbridge property each hold 25%, it is not required to reveal their identities.
What information is accessible in secrecy jurisdictions?
Historically, corporate registries in secrecy jurisdictions have allowed access only to companies’ incorporation date, current status (whether it is active or has been dissolved) and the name of its local registered agent. Without court disclosure or adequate contextual information such as the names of proxies or lawyers, it was often impossible to make a case for an asset’s likely ownership.
However, this is no longer always the case. While every jurisdiction is unique in terms of what information is available and how it can be accessed, it’s often possible to obtain the following:
· Annual returns
· Lists of company directors, which can also include their addresses
· Certificates of incorporation
· Memoranda or articles of association showing a company’s shareholders at the time of its incorporation
· Certificates of registration of a mortgage or a charge
· The particulars of a mortgage or charge
· Security assignments for specific assets
All of the above can be peppered with additional information of use to investigators. For example, documents might include the names and signatures of witnesses, or of a particular banker or lawyer who has advised on certain transactions.
In some cases, the above may even contain the UBO’s signature or state that the company in question is administered on the UBO’s behalf. They can also provide otherwise inaccessible information about charges or other encumbrances over assets such as yachts or jets, which can help a creditor decide whether enforcement is worth their time and effort.
What investigators can do with this information
On its own, a director’s address or the name of a witness to a document’s signing may not mean anything. However, they can lead investigators towards further information which can help identify an asset’s UBO.
A witness to a signature may be a family member or trusted associate; a director of an offshore company might also be a director of the UBO’s other entities, across multiple jurisdictions; a bank may hold a mortgage over the underlying asset and to have financed the acquisition of other prized assets. The more data available, the more one can draw together seemingly disparate strands of information to demonstrate economic interest. Combined, such circumstantial evidence can form the basis of a freezing injunction or disclosure or discovery applications to obtain non-public information, such as account statements or even email correspondence.
In one case, our client obtained a freezing injunction over a multi-million dollar London property on the basis of a signature by the UBO on a planning application, even though the house was held by a seemingly unrelated BVI entity. In another, we linked a Bermuda-registered company that owned an unencumbered USD 2.5 million jet to the defendant by showing that its director was a UK-based trust manager and a person with significant control of the defendant’s main corporate vehicle in Europe. This not only demonstrated the debtor’s likely beneficial ownership of the jet, but also identified the trust manager as a prime candidate for a disclosure application.
And then there are family members on social media. Consider the example of the Château de Montapot, a 19th century palace near Paris, which a BVI-registered company acquired in 2003. While the company’s owners were not named publicly, its director was the wife of a deputy managing director of the state-owned Russian Railways. An Instagram post showed his wife enjoying a lunch at the château. In another recent case, a debtor’s teenage son’s Instagram posts allowed us to pinpoint the debtor’s location, as well as his USD 2.2 million home.
Challenges and rewards
Gathering relevant information from secrecy jurisdictions is not easy, and is not always possible. It can be time consuming, as local officials pour through physical copies of records filed years ago. It can be bureaucratic, with investigators being passed between multiple staff members and having to fill out countless forms. And it can be expensive, with some files costing hundreds of dollars to retrieve. Despite these challenges, patience and tenacity can reap rewards when enough evidence is gathered to show likely control or ownership of an asset that is then frozen and eventually realised.
Are secrecy jurisdictions as secret as they appear? It’s worth spending the time and effort to find out.