Nominee Directors and Shareholders

Using a nominee is not illegal in itself. Investors may want privacy or convenience, and professionals often act as nominees for clients. It becomes a concealment device when the arrangement is used to hide the true owner from banks, tax authorities or the public. The nominee signs documents and appears on registers, but follows the instructions of the real owner, often under a private agreement the public cannot see. A straw man is a similar front person with no real stake. India's benami rules deal with a related practice, holding property in another person's name. Banks look through nominees when applying beneficial ownership rules and ask for disclosure of who instructs them. Warning signs include directors who hold many unrelated appointments, an address shared by hundreds of companies, and a nominee who cannot explain the business. Some countries require nominees to disclose their status or hold a licence. A name on a register says little about who controls a company, so banks look past it and ask who gives the instructions.

A bank onboarding a trading company sees that its only director sits on the boards of more than 200 firms at the same address. She says she signs where told and has never met the owner. The bank cannot establish who really controls the company, declines the account and reports the concern.