Corporate Vehicles and Illicit Finance

About the Corporate Vehicles and Illicit Finance project

bundles of UK banknotes in holdallThis project, funded by the Partnership for Conflict, Crime and Security Research (PaCCS), investigates the (mis)use of “corporate vehicles” in the organisation of serious crimes for gain with specific focus on the concealment, conversion and control of illicit finance. The project runs from December 2016 until May 2018.

Scope of the project

A central issue for those involved in serious crimes for gain, such as transnational organised crime groups, ostensibly non-criminal commercial enterprises and/or wealthy and powerful individual and corporate elites, is that in order to conceal their illicit finance (that is, the proceeds generated for and from their crimes), some form of collusion and/or cooperation with external, legitimate actors such as accountants, lawyers and other professionals may be required. One mechanism for facilitating this is the creation and misuse of legitimate business structures, such as ‘corporate vehicles’.

A ‘corporate vehicle’ is a legitimate, and otherwise legal, business entity, such as a Limited company, trust, foundation, or partnership, that is commonly used in business to structure a range of commercial activities and/or in the control and movement of wealth and assets. For instance, it is argued that such structures permit businesses to incorporate companies in low or no tax regimes, provide flexibility in global markets, and reduce the level of regulation, particularly when set up in offshore financial centres that offer great secrecy, either by concealing the origin of the money or the identity of – what has become known as – the ultimate beneficial owner. Large flows of monies move through the global financial system in this way and this has become a central feature of business in market-based economies.

Licit corporate entities provide opportunities to conceal, convert and control illicit finance and the proceeds of criminal behaviours by offering an external appearance of legitimacy to the ‘beneficial owners’ (i.e. the real people who actually own them) of these entities and/or the clients who use them to transfer funds. For instance, the EU’s Serious and Organised Crime Threat Assessment (2013: 14) foregrounds how ‘organised crime groups exploit various legal business structures and professional experts to maintain a façade of legitimacy, obscure criminal activities and profits, and to perpetrate lucrative and complex crimes’. Thus, third-party legitimate actors can also become witting, or unwitting (or wilfully blind), facilitators of organised and serious crime activities. However, there remains a major research gap in understanding the dynamics around how organised crime groups misuse such licit corporate entities and who assists them and this project aims to address this.

Aims of the research

Our research is guided by three primary questions:

  1. How, why and under which conditions do those involved in (transnational) criminal enterprise for profit use corporate vehicles for the concealment, conversion and control of illicit finance?
  2. Are there discernible patterns, trends and features in the selection, creation and use of corporate vehicles for illicit purposes?
  3. What are the legal, enforcement and policy conditions that govern the creation and use of corporate vehicles and are there legal/criminogenic asymmetries across the EU and which conditions are more or less conducive to managing illicit finance?

This research project aims to inform our understanding of such misuse of corporate vehicles in order to support the activities of multiple stakeholder groups. For instance, the project will provide these groups with (1) a comprehensive understanding of how, why and under which conditions transnational organised crime groups use corporate vehicles for the concealment, conversion and control of illicit finance in the UK and the Netherlands and associated patterns, trends, features and impacts of these activities, and (2) a concise analysis of legal, enforcement and policy conditions that govern the creation and use of corporate vehicles for illicit finance in addition to the extent of legal/criminogenic asymmetries across the EU.