Omar Abid

Ultimate Beneficial Ownership is Dangerous

On 19 November 2023, a group of individuals seized a cargo ship in the red sea. It's hard to classify what these individuals are since the US has stopped denominating them as terrorists. Their act, considered as piracy by some, can also be seen as sanctions by an order they self-proclaimed. Despite having a broken economy, they have somehow acquired astoundingly sophisticated and costly weaponry. They call themselves the Houthi.

The Houthi live in a real alternate reality in which they operate an alternative law and order system. The reality strikes, however: Despite a seven-year struggle against a Saudi-led campaign, the Houthi came on top. They are here to stay.

Last month, the Houthi have enacted sanctions on "Israeli-linked" vessels. It's hard to pin-point what "Israeli-linked" implies. Given the limited extent of the Houthi's legal system, this determination could only be made in retrospect. Still, in order to implement their order, the Houthi need some information. For example, they need to know that a vessel is coming into the red sea. They also need to establish a certain link to Israel to justify their actions. Even in their alternate reality, the Houthi could not levy actions on random vessels: This can backfire and would be ineffective in applying the desired pressure they are looking for.

Houthi Flag

The Houthi flag adheres to the KISS principle. It reads: God is the Greatest, Death to America, Death to Israel, A Curse Upon the Jews, Victory to Islam

The Bureaucracy of the Empire

Ultimate Beneficial Ownership is a tool to determine the ultimate owner of something (which usually means a thing of value). From Wikipedia:

According to the OECD's 2003 December report, entitled "Ownership and Control of Ships", corporate structures are often multi-layered, spread across numerous jurisdictions, and make the beneficial owner "almost impenetrable" to law enforcement officials and taxation. The OECD's Maritime Transport Committee Secretariat had initiated an investigation at its January 2003 meeting.[11][12] The report concludes that "regardless of the reasons why the cloak of anonymity is made available, if it is provided it will also assist those who may wish to remain hidden because they engage in illegal or criminal activities, including terrorists."

These tools can be quite useful in establishing sanctions, and it is my opinion that this is the ultimate reason for their creation. Taxation would be next. It is quite difficult, for the US and its allies, to enforce sanctions on anonymous entities.

But while it's relatively feasible to ask ships or persons for a password on one's territory, this might be trickier when these ships are moving across the world. The empire could stop these ships but if all of the them are anonymous, it becomes a hurdle.

And thus, transparency laws were created. Countries had to implement these laws. Blacklists were made. Politics had to interpose. Jurisdictions were compelled. And a full bureaucracy was established. This is not something a single country can pull. This was a tremendous effort led by the G7.

Weapons of War

In 1989, the FATF was established. The FATF purpose, on paper, is to promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. In more concrete terms, the FATF creates tools to target enemies. They are weapons of war except that these weapons have more of an informational nature than a physical one.

And this is where it gets interesting: If a tool was created to target adversaries, would it be wise to use it for taxation?

The problem is: This tool can afford a new asymmetry to the adversary. This asymmetry can tip the balance of power to the advantage of the adversary. The real problem, however, will be if the empire can't lose this tool because it's already inherent to its functioning.

This might seem like a benign thing, but I object. I think we largely do not understand, at large scales, how such information plays out in the balance of power. You can see the effects of a bullet, a bomb, or an air-strike and determine that these objects are dangerous. But it's much harder, here, to make such a determination.