Originally Syndicated on September 13, 2023 @ 10:48 am
A traditional Dutch legal structure called the trust office foundation (STAK) is what family-owned businesses use to protect themselves from wasting an inheritance.
In recent decades, tax experts and asset managers have recognised that the STAK may be used to disguise true stakeholders and their assets. It is marketed as ‘stable, secure, and discrete’ by financial service providers worldwide. In the Netherlands, an estimated 21,000 STAKs are registered.
According to recent sources, the Pandora Papers contain more than 50 of them. It’s not always clear what they’re for or who profits from them.
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Dutch Foundations STAK in the Netherlands: Inside Story
Over the past 20 years, financial service providers worldwide have promoted Dutch foundations (STAKs). They hide the company’s owners and assets by showing only the members’ names.
The Netherlands has 21,000 STAKs, according to FTM. The ICIJ’s Pandora Papers leak, which includes approximately 12 million documents from 14 offshore services firms, revealed more than 50 secret organisations utilised in international company structures.
Even though FTM acknowledged it wasn’t always clear what STAKs were for or who they assisted or hid, experts featured in the piece said misuse fears are justified.
Gerard van Solinge, a Radboud University Nijmegen commercial law professor and Allen & Overy lawyer, called the Dutch Foundation (STAK) a “kind of export product.”
FTM linked multiple of them with unknown stakeholders to affluent benefactors using Pandora Papers data. Two former Russian bankers were accused of money laundering: a Colombian art collector who runs a charitable foundation and a Kazakh mining tycoon whose multibillion-dollar company was under investigation by the U.K. Serious Fraud Office for fraud, bribery, and corruption in Africa.
The latest Pandora Papers probe is STAK. Those papers illustrated how wealthy people, including government leaders, celebrities, and criminals, hide money in an underground economy to avoid scrutiny.
What are Dutch Foundations STAKs, and how do they work?
The STAK, a common legal organisation in the Netherlands, is frequently set up as a holding company that oversees a private or public limited business. The foundation acquires ownership of the shares but holds them on behalf of others, known as depository receipt holders. This is a legally binding agreement.
A certificate holder is entitled to the share’s value and dividends. However, unless otherwise agreed, the certificate holder has no legal authority over the company.
It only requires one board member. It is the sole stakeholder of the corporation over which it has authority. Because STAK depository receipt holders are not recorded, they can stay anonymous. Another advantage of the depository receipt is that it can be transferred without the involvement of a notary.
To put it simply, it separates a company’s legal ownership from its financial benefits.
What are the advantages of Using a ‘Trust Office Foundation’ (STAK) in Asset Protection?
Top Lawyers from Spain, Peru, and the United States addressed the question:
What can I do with my assets in this new abnormal world?
They were showcased with the latest legal and tax tools to safeguard the assets of the wealthy.
Philip van Hilten, from the Netherlands, was one of the speakers. He is a partner at No More Worries, a company near The Hague that helps wealthy families with legal and tax issues.
He said in a very strong way that the “Trust Office Foundation” (STAK) is a typical Dutch legal body that has worked well for more than a hundred years. This system of laws is “stable, safe, discreet, and has shown its worth.”
More importantly, there are almost no laws that limit them, and they are rarely looked at by officials or “outsiders. It is not necessary to file annual account statements.
Because of these benefits, many businesses in the Netherlands have been using STAK for decades.
During a highly publicised and controversial case in several countries, it also came to light that the former Russian commodities giant Yukos Oil Company was able to keep a lot of its Russian assets.
The Pandora Papers reveal many Russian Oligarchs
The Pandora Papers investigation is the largest journalistic collaboration in history, exposing tax-haven secrecy through millions of records. The inquiry uncovered the superrich’s hidden assets, covert dealings, and riches, including more than 130 billionaires and significant people. The confidential files also include a global cast of fugitives, prisoners, celebrities, football stars, and others, including judges, tax authorities, spy heads, and mayors from around the world.
Recent cases of Russian oligarchs utilizing Dutch foundations for wealth-hiding
Russian oligarchs use Dutch STAKs to conceal their assets by establishing sophisticated business structures that separate the legal ownership of their shares from the beneficial ownership of their shares. They may avoid identifying their names and escape taxes, fines, and other legal measures in this manner. Here are some instances of how they do this:
- In 2010, Lukratief Investering, an Amsterdam-based STAK, received more than 35 million euros from two offshore firms controlled by Alexander Ostrovskiy and Kirill Yuroskiy, two former directors of Moscow’s now-defunct Russian Bank of Settlements and Savings. The two bankers were charged with money laundering and embezzling more than one billion euros from their company. The STAK was reportedly used to disguise the origin and destination of money moved to other offshore organisations and real estate projects.
- A trust office in Rotterdam established a STAK called Nieuw Amsterdam in 2014 to hold the shares of a Cyprus firm called Nicosia Investments Limited. In turn, the Cyprus business acquired a share in Bashneft, a Russian oil corporation. Vladimir Yevtushenkov, a Russian oligarch and billionaire imprisoned in 2014 on allegations of money laundering and fraudulent purchase of Bashneft, was the ultimate benefactor of this organisation. The STAK was used to prevent Russian authorities from seizing Yevtushenkov’s assets.
- A trust office in Amsterdam formed a STAK called Stichting Administratiekantoor Atrium European Real Estate in 2006 to issue certificates of shares of a Jersey company called Atrium European Real Estate Limited. In turn, the Jersey business possessed a network of retail malls and office buildings across Central and Eastern Europe. Leonid Fedun and Vagit Alekperov, two Russian billionaires who are also big owners of Lukoil, Russia’s second-largest oil producer, were the final beneficiaries of this setup. The STAK was used to evade income and capital gains taxes in the countries where the properties were located.
How many Dutch Foundations are registered?
The Chamber registered nearly 1500 trust office foundations in 2000. The number of registrations increased to over 3400 in 2022, only to fall significantly in the following years to between 2100 and 2600. More than 2600 STAKs have been registered in the last two years. According to the Chamber of Commerce, there were 28,018 of them registered in the Dutch Trade Register as of mid-June 2021.
What are the risks and consequences of hiding assets in Dutch foundations?
In July 2021, the Dutch Centre for Crime Prevention and Safety (CCV) released a report on organisations that were not doing their jobs right. In a statement about STAK, the CCV points out two things that make this type of foundation for misuse: “On the one hand, it can provide an administrative link in a complicated network to distance or hide the final stakeholder. On the other hand, this form can be helpful in some situations because it can separate and protect assets from a company.
The Justice Service, which is part of the Dutch Ministry of Justice and Security, is quoted in the report as saying: “Trust office foundations (STAK) often pop up in networks where there is a risk of misuse. When private limited companies are included, the organisation gets more complicated, and it’s harder to figure out what the activities are.
Why is this important?
The STAK’s secrecy makes it a favourite tool of tax evaders and fraudsters. Assets are easily concealed, and owners are sheltered from examination. According to experts, its rising usage in multinational company structures is ‘troubling’ and calls for notaries to be more vigilant.
How did FTM investigate this?
The International Consortium of Investigative Journalists (ICIJ) disclosed the Pandora Papers, which included around 12 million private papers obtained from 14 offshore service providers in tax havens around the world.
Russia Has a Huge Amount of “Dark Money” Abroad
According to the Atlantic Council, Russians have around $1 trillion (£750 billion) in “dark money” concealed overseas.
According to its 2020 forecast, Russian President Vladimir Putin and his close cronies—rich Russians called one-quarter of this sum.
According to reports,
“This money can be exploited and steered by the Kremlin for espionage, terrorism, industrial espionage, bribery, political manipulation, disinformation, and many other nefarious purposes.”
Where did the wealth come from?
The National Endowment for Democracy claims Putin has urged close allies to “steal from the state budget, extort money from private businesses, and even orchestrate the outright seizure of profitable enterprises.”
It is said that they have amassed personal fortunes worth tens of billions of dollars in this manner.
Russian opposition leaders Boris Nemtsov and Vladimir Milov have alleged that $60 billion was moved from the finances of energy company Gazprom to Putin’s friends between 2004 and 2007.
According to the International Consortium of Investigative Journalists’ Pandora Papers, those close to Putin have gotten extremely rich and maybe assisting him in moving his own fortune around.
