Criminals and oligarchs are hiding wealth in secretive Dutch foundations, new investigation finds

A discrete Dutch legal structure, favored by family-owned businesses, has become a popular tool for oligarchs and other bad actors to hide their wealth and evade taxes, a new investigation from Follow the Money found.

Over the past two decades, financial service providers worldwide have increasingly touted the use of trust office foundations, or STAKs (short for stichting administratiekantoor), which only reveal the names of company directors, concealing actual stakeholders and their assets.

Currently, an estimated 21,000 STAKs are registered in the Netherlands, according to FTM. The investigative outlet used ICIJ’s Pandora Papers leak, which contained nearly 12 million documents sourced from 14 offshore services firms, to identify more than 50 of the secretive entities being used in international corporate structures.

While FTM acknowledged the exact purpose of those STAKs — and who they may benefit or conceal — is not always clear, experts cited in the story warned fears of misuse are well-founded.

Gerard van Solinge, a business law professor at Radboud University Nijmegen and a lawyer at Allen & Overy, said the Dutch STAK has become a “kind of export product.”

FTM used Pandora Papers data to connect several STAKs with previously unknown stakeholders to wealthy beneficiaries, including two former Russian bankers accused of money laundering; a Colombian art connoisseur who runs a charitable foundation; and a Kazakh mining mogul whose multi-billion-dollar company was investigated by the U.K. Serious Fraud Office for suspected fraud, bribery and corruption in Africa.

The STAK probe is the latest investigation based on the Pandora Papers, which exposed how the world’s rich and powerful — including government officials, celebrities and criminals — stash wealth in an underground economy to avoid oversight.

Lukratief Investering, an Amsterdam-based STAK identified by FTM in the Pandora Papers, received over 35 million euros in 2010 (roughly $42.5 million at the time). The money reportedly came from two offshore companies owned by Alexander Ostrovskiy and Kirill Yuroskiy, two former directors of the now-defunct Russian Bank of Settlements and Savings in Moscow. In 2015, the bank’s license was revoked by the Russian Central Bank for repeated violations of anti-money laundering rules. Anna Ioannou, a Cyprus-based corporate service provider, had been appointed as a ‘straw man’ director of the foundation by a notary in the Netherlands, essentially hiding that Ostrovskiy and Yuroskiy controlled all of its shares.

FTM also highlighted the role of global asset managers in the proliferation of STAKs, which were originally conceptualized to protect the assets of Dutch families and corporations, over the last twenty years.

At the Annual International Private Client Conference, held in a five-star London hotel in March, lawyers spruiked the latest legal and tax tools for safeguarding assets to wealthy clients, according to FTM. One speaker labeled the Dutch legal structures “stable, safe, discrete,” noting that they are largely exempt from scrutiny by authorities, or “outsiders.”

The foundations hold assets on behalf of a company’s beneficiaries. Only the STAK’s director must be registered with authorities and there is no requirement to file annual account statements, creating a blanket of secrecy over the company’s activities.

One critic of international corporations’ increasing use of STAKs told FTM the trend is “troubling.” Christiaan Stokkermans, a former notary and business law professor at Erasmus University in Rotterdam, said he had received several requests from international clients seeking his help to set up STAKs for what he deemed nefarious purposes.

You will always see that certain people keep looking for loopholes in the law.

Notaries play a key role in the legal creation of the foundations: They set up the STAK’s structure and draft its articles of association. Stokkermans said some notaries, who are required by law to vet clients, should apply more scrutiny to prevent misuse, such as for tax evasion or money laundering. But, he said, completely preventing dubious STAK creation is impossible.

“You can hardly prohibit people from setting up a foundation,” he said. “We don’t live in a police state.”

Lawyer Maaike Steegmans, whose Ph.D. thesis at the University of Utrecht is focused on the role of foundations in family businesses, told FTM her research uncovered many STAK articles of association that had not been customized by notaries, giving leeway for the foundation to engage in shadowy activities.

While critical notaries can help prevent STAK misuse, FTM also highlighted the role of the 2021 Dutch Management and Supervision Act, which enables foundation shareholders to oust negligent directors.

“It remains a cat-and-mouse game,” Steegmans said. “You will always see that certain people keep looking for loopholes in the law.”

Article Credit: https://www.icij.org/investigations/pandora-papers/criminals-and-oligarchs-are-hiding-wealth-in-secretive-dutch-foundations-new-investigation-finds/