Transfers of money over the last 6 months to a corporation in a jurisdiction with strict secrecy laws triggered an alert. Which of the following should cause the most suspicion of money laundering?

The presence of bearer shares is the most significant red flag for money laundering in this scenario. Bearer shares are unregistered, negotiable instruments that grant ownership to the person who physically possesses the share certificate. This anonymity makes it extremely difficult to identify the ultimate beneficial owner (UBO) of the corporation, a primary goal in money laundering schemes. While operating in a secrecy jurisdiction is already a risk, the use of bearer shares provides a specific, powerful mechanism to obscure the flow of illicit funds and conceal the identities of those controlling the assets, making it a more acute indicator of potential money laundering than the other options.

A. The jurisdiction is a known tax haven. This is often correlated with secrecy jurisdictions and is a risk factor, but it is less specific than the use of bearer shares, which directly facilitates the anonymity of ownership.
C. The corporation director is a European citizen. Nationality alone is not a reliable indicator of risk. Judging suspicion based on a director being a European citizen is overly broad and discriminatory without additional specific risk factors.
D. No financial statements have been filed for 3 years. This is a strong indicator that the company may be a shell company with no legitimate operations. However, bearer shares are a more direct and potent tool for actively concealing ownership.

1. Financial Action Task Force (FATF). (2023). International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation – The FATF Recommendations. FATF, Paris, France.

Interpretive Note to Recommendation 24 (Transparency and Beneficial Ownership of Legal Persons), Section C, Paragraph 7(a): The FATF explicitly identifies bearer shares as a significant money laundering risk. It states, "With respect to bearer shares and bearer share warrants, countries should take measures to prevent the misuse of such instruments..." This highlights the international consensus on the high risk associated with bearer shares.

2. ACAMS. (2020). CAMS6-CERT Certification Exam Study Guide. Association of Certified Anti-Money Laundering Specialists.

Chapter 2, "The Risks and Methods of Money Laundering and Terrorist Financing," Section on "Use of Corporations": The guide describes bearer shares as a "tremendous money laundering vehicle because they belong, on their face, to the 'bearer'." It emphasizes that this anonymity is a key tool for obscuring beneficial ownership.

3. The World Bank / UNODC. (2011). The Puppet Masters: How the Corrupt Use Legal Structures to Hide Stolen Assets and What to Do About It. Stolen Asset Recovery (StAR) Initiative.

Page 29, Box 2.2, "Bearer Shares": This report details how bearer shares provide a high degree of anonymity and mobility, making them "one of the most troublesome" corporate features for law enforcement and a preferred tool for concealing the proceeds of crime and corruption.