Legal persons can also be abused by individuals seeking to hide the source of an incoming transfer. For example, a politically exposed person (PEP) might receive a transfer that supposedly represents investment returns from a company located in another jurisdiction. Without knowing the beneficial owners of the originating company, it is difficult to say whether the transfer does in fact represent a return on investments, or whether it is in fact a bribe or somehow related to corruption.

The involvement of legal persons and arrangements can also make it more difficult for LFIs to identify a customer’s true source of wealth. A legal person that is represented as a profitable business, for example, may in fact be a shell company that merely passes on income from illicit sources.