Nominee and Trust Layers Behind a Commodity Trader
Meridian Commodities Pte Ltd, a Singapore-incorporated agricultural trader, has banked with you for seven years and generates about USD 40 million in annual flow. Its ownership is 60% Halcyon Holdings Ltd (BVI) and 40% the Vantage Family Trust (Jersey). Halcyon's shares are registered to a nominee company; the CDD file names Mr. A. Karimov as 'beneficial owner' based on a 2019 declaration, but no passport, ownership chart, or trust deed is on file. The trust has a protector resident in a jurisdiction with no exchange of information. A USD 14 million wire has arrived from a newly incorporated UAE trading company, and the RM wants to release it because the client has 'never missed a payment'. When EDD asks for the trust deed and source of wealth for the UAE counterparty, the client says the trust is private and threatens to move the relationship. The RM asks you to approve a temporary exception.
1. What are the beneficial ownership and EDD deficiencies, and how should the bank determine Meridian's UBO through the nominee and trust layers?
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Deficiencies. A 2019 declaration is not verification. The file has no ownership chart, no identification of the natural persons behind Halcyon, no trust deed or trustee confirmation, and no source of wealth for the UBO. The nominee is a legal owner only; naming it, or naming Mr. Karimov without corroboration, does not satisfy beneficial ownership. The protector in a non-cooperative jurisdiction is a control person and must be identified and screened.
How to determine UBO. Build a layer-by-layer chart. For Halcyon, obtain the register of members, the nominee agreement, and the identity of the person on whose behalf the nominee holds. Look through to natural persons who ultimately own or control, using the 25% threshold as a floor, not a ceiling. For the Vantage trust, identify settlor, trustee, protector, beneficiaries or class, and any person who can exercise control; obtain the trust deed or a trustee certificate. Screen all natural persons against sanctions, PEP and adverse media lists. Reconcile the declared UBO with payment behavior. If the bank cannot identify the UBO with reliable, independent evidence, the relationship is high risk and EDD is incomplete.
2. Should the USD 14 million wire be released, held, or returned? Set out the decision criteria and conditions.
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Do not release the wire. Hold it pending EDD and a documented decision. The decision criteria are: (1) verified UBO of Meridian, including the Halcyon nominee chain and the trust; (2) source of funds and source of wealth for both Meridian and the new UAE counterparty; (3) a credible commercial purpose supported by contract, invoice and shipping documents; (4) sanctions, PEP and adverse media screening of the counterparty, its owners and the UBO; (5) consistency with the established customer profile; and (6) the bank's legal obligations in the relevant jurisdictions.
Conditions for release would include certified ownership documents, trustee confirmation, identification of the protector and beneficiaries, counterparty ownership information, bank statements evidencing source of funds, and independent verification of the trade. Tenure and a clean payment history are not substitutes for EDD. If the client refuses to provide the information, return the funds and consider exiting the relationship. Document why the wire was held, what was requested, and who approved the decision.
3. What should be documented and escalated, including reporting or exit considerations?
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Document every EDD request, the client's refusals, the RM's request for an exception, and the decision rationale with approvals. Escalate to the MLRO and the financial crime committee. Consider an STR/SAR: a layered offshore structure, a protector in a secrecy jurisdiction, a large wire from a newly incorporated counterparty, and refusal to provide a trust deed are suspicion indicators. Do not tip off the client. If the bank exits, follow jurisdictional requirements, preserve records, and consider whether a report must be filed before or after exit. RM or board pressure is irrelevant to the suspicion assessment; the MLRO should decide independently and record the basis.