Discretionary trust in a layered offshore ownership chain
Northbridge Trading Ltd, incorporated in Seychelles, applies for a corporate account at a Singapore bank. Its sole shareholder is Cedar Holdings SA (Panama). Cedar is 60% owned by the Ravel Family Trust (Jersey), a discretionary trust for the settlor's two adult children, and 40% by Mr. H. Ito, a Japanese national. Northbridge's sole director is a nominee from a corporate-services provider; Mr. P. Varga holds a power of attorney to operate the account. The company says it trades wholesale electronics, with annual turnover of USD 12 million and counterparties in Hong Kong and UAE. The RM provides a certificate of incumbency and a share register, but says the trust deed is "private" and cannot be shared. The UBO form lists Mr. Ito at 40% and "the trust" at 60%. No individual is named for the trust. The bank's threshold for beneficial ownership is 25%. No sanctions matches appear for the company or Mr. Ito.
1. Identify the beneficial owners of Northbridge under the 25% ownership prong and the control prong. Explain your calculation and any gaps.
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Under the ownership prong, Mr. Ito is a beneficial owner: 40% of Cedar, which wholly owns Northbridge, gives him an effective interest of 40%. The trust's 60% cannot be left as "the trust" because a trust is not a natural person. The bank must look through to the settlor, trustees, protector if any, beneficiaries or class of beneficiaries, and any individual with ultimate effective control. Until the trust deed or a trustee's certificate identifies those persons, the ownership prong is incomplete. Separately, the control prong may capture Mr. Varga: a power of attorney to operate the account is not ownership, but it can be control if he can direct payments or act without further approval. The nominee director is a control person in a formal sense, but nominee status alone does not make him a beneficial owner; the bank should confirm who instructs him. The UBO form is therefore wrong to list "the trust" as an owner.
2. What documents and clarifications should the bank obtain before onboarding, and how should it treat the trust?
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Obtain the trust deed or a trustee-certified extract, a certificate of incumbency naming current trustees, the settlor and beneficiaries, any letter of wishes, and trustee resolutions authorizing the account. Identify the protector and any person who can remove trustees. Obtain a certified ownership chart, a copy of the POA, and an explanation of Varga's role and remuneration. Verify the source of wealth of Mr. Ito and, through the trustee, the source of the trust's funds. Screen all named individuals. Because the structure is multi-jurisdictional and includes a discretionary trust and a nominee, treat it as higher risk and require senior approval. The trust's privacy objection is not a lawful basis to withhold the information; if the trustee refuses, the bank cannot verify beneficial ownership.
3. Would you open the account? State any conditions or refusal.
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Do not open the account on the current file. The bank may keep the application pending while it seeks the trust information, but if the customer or trustee refuses, decline and document the reason. Decline is not itself a suspicious activity report; however, if the refusal is coupled with evasive answers, inconsistent documents, or adverse media, escalate to the MLRO for a suspicion assessment. If the missing information is later provided, open only with conditions: annual UBO refresh, transaction monitoring for Hong Kong and UAE counterparties, no account operation by the nominee without dual approval, and review of any changes in trusteeship. The key judgement is that "private" is not an acceptable answer to a beneficial-ownership request.