This Q&A document provides guidance for identifying the origin of the assets of an object company or ultimate beneficial owner (UBO).
What does identifying the origin of assets entail?
The origin of the assets is essentially the source of all funds of an object company and UBO, regardless of whether these pass through the object company or not. The trust office must establish the origin of the assets, and verify the likelihood that these assets do not originate from criminal/corruption activities. Please note that 'assets' refers to the overall picture and not only to the services provided by a trust office.
Why does a trust office have to examine the origin of assets?
If the origin of assets is unclear, the trust office's services provided to a customer may constitute a severe integrity risk. In addition, the risk of abuse of the trust office's services is high. Criminal or corrupt individuals will do anything to conceal the origin of funds for money laundering purposes. Establishing the origin of assets is also important in view of controlling the risks of terrorist funding and abuse, which may damage trust in the financial sector. For example, it is essential to ascertain that the money does not originate from a country on which international sanctions have been imposed, or whether a UBO is included in a Sanctions Act list. This is why the legislator demands that each trust office knows the origin of the assets of its customers.
How should the trust office examine the origin of assets?
The first step is to determine the size and scope of the assets, the second to investigate the origin of the assets. In examining the object company's assets, the trust office must not only investigate the company's shareholders, but also the lenders. Who are the external capital providers, and which terms and conditions apply? For example, loan terms, interest rates and security provided. The terms and conditions of a loan may be such that the lender has de facto managing power over the object company, which means that the lender may be qualified as a UBO.
The investigation should cover all of the assets of the UBO and how the assets were obtained. Relevant information may be obtained from the UBO, from intermediaries or from public sources. It may be necessary to conduct an external investigation. The trust office must assess the information obtained, so that it knows the size of the total assets and how the assets were obtained. This is also important for assessing whether transactions are usual or unusual. If it is unclear how assets were obtained, in particular where it concerns substantial assets, the trust office must consider to what extent the associated integrity risks are sufficiently covered.