Complex corporate structures : a risk assessment

Abstract

Context This dissertation aims to identify the key risk factors contributing to the complexity of corporate structures and provide a comprehensive framework for the assessment thereto. This in view that there is no clear guidance on how ‘complex corporate structures’ should be measured by different bodies within different sectors and leaves room for interpretation. Complex structures are especially prevalent within the Financial Services industry due to a number of factors, including exposure to different jurisdictions, multiple ownership layers and variety of corporate entities involved in such setups. Purpose This study seeks to evaluate risks associated with the ownership and control structure of financial institutions licensed by the Malta Financial Services Authority. This objective was achieved by gathering information from publicly available sources and analysing the various factors contributing to the complexity of corporate structures, such as the presence of entities incorporated in less transparent jurisdictions, use of complex corporate vehicles and elevated number of ownership layers. Methodology Higher risk scenarios, such as increased transparency risks, were identified using a risk scoring methodology specifically designed for this study. These scenarios are further illustrated through case studies that provide tangible evidence of sophisticated ownership structures being misused for activities such as money laundering, corruption, sanctions evasion, and other illicit activities. The study is being performed through a systematic review, referring to literature that is relevant to the topics around the ‘Risk’ ‘Assessment’ of key ‘Indicators’ of what is considered ‘Complex’ in relation to ‘Corporate’ ‘Structures’, in an attempt to address the following research question: What are the key risk indicators contributing to ‘Complex Corporate Structures’ and how can these be assessed?