Layered Offshore Ownership in a New Current Account
ABC Traders Pvt Ltd, incorporated in Pune in 2021, applies to open a current account. It submits PAN, GST registration, MoA/AoA, a board resolution and audited turnover of ₹4.2 crore. Shareholding is 60% with two Pune-based brothers, 30% each, and 40% with Meridian Holdings Ltd, a Mauritius company. Meridian's sole shareholder is the Coral Trust, a discretionary trust in the Cayman Islands. The authorised signatory is one of the Indian brothers. When the branch asks for the trust's settlor, trustees, beneficiaries, protector and controlling persons, he calls it a 'private family arrangement' and provides only Meridian's certificate of incorporation. A public registry shows one trustee is a former senior government official. The bank's risk tool rates the account medium risk because the Indian directors are locally known. The branch wants to open the account before month-end to capture a ₹3 crore import remittance.
1. Identify the beneficial owners and explain why the branch cannot rely on the 60/40 split or the medium-risk rating.
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Under the PMLA/RBI KYC framework, a company's beneficial owners are the natural persons who ultimately own or control more than 25% of shares, capital or profits, or exercise control by other means. Here, each Indian brother holds 30%, so each is a BO. The 40% Mauritius block is also above 25%, so the bank must look through Meridian to the Coral Trust. For a trust, CDD must identify the settlor, trustees, beneficiaries or class of beneficiaries, protector and any natural person with ultimate effective control; a certificate of incorporation and a label of 'private family arrangement' are not enough. The medium-risk rating is inconsistent with the layered offshore structure, refusal to disclose BOs and the PEP indicator (former senior government official). That combination points to high risk and requires EDD, not standard CDD. If the natural persons behind the trust cannot be identified despite documented efforts, the bank should not simply default to the Indian signatory; it must record why and consider declining the relationship.
2. What CDD/EDD steps and onboarding decision should the branch take before the ₹3 crore remittance?
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The branch should not open the account merely to capture the remittance. It should: (1) obtain the complete BO chain for Meridian and Coral Trust, including certified trust deed, trustee list, protector, beneficiary class and any side letters; (2) verify identities using independent reliable documents, not only customer statements; (3) establish source of funds and wealth for the ₹3 crore and expected turnover, with import contract, invoices and counterparties; (4) screen all BOs and trustees against sanctions and PEP lists; because one trustee is a former senior official, treat the relationship as PEP, obtain senior management approval, establish source of wealth and apply enhanced ongoing monitoring; (5) assess purpose and consistency of the account with the stated business; (6) document the risk assessment and rationale. If the customer refuses to provide BO or trust information, do not onboard; consider filing an STR if suspicion is established, with MLRO approval, and do not tip off. A high-risk relationship can be onboarded only with senior management approval and robust monitoring.