The digital revolution and subsequent advent of big-data means businesses must be equipped and prepared to navigate the new landscape; not only to grow but to protect themselves.
Commercial credit lending, risk management and compliance with government legislation are constantly evolving to keep pace with market demands and industry developments. One such development is the recent focus on the long-running institution of trust entities and the identities of the individuals behind them.
Trusts, once a safeguard for the families of crusading lords in medieval England, have evolved into complex and clandestine financial vehicles which enable individuals to engage in the business landscape without having to completely reveal themselves or any other parties connected to the trust.
This opaque nature of trusts poses the questions: Do you know who you’re doing business with?
The landscape of trust entities
The overview of trust entities in Australia illustrates the challenges businesses face when engaging in trade with trusts.
By design, trusts are not legal entities in the same way as people and companies. Trusts represent a ‘relationship’ between a trustee and a beneficiary, often with other parties involved such as companies, estates, and trustors.
The two primary issues when looking at trusts from a data and analytics perspective are as follows:
1. A registry of trusts does not exist publicly.
The lack of a dedicated trust registry means there are no comprehensive and centralised data on trusts. Failure to link trusts to their beneficiaries/ trustees or trustors presents a slew of problems, including putting businesses at risk of unwittingly breaching compliance requirements, such as anti-money laundering, or indirectly funding terrorist organisations.
2. A trust’s point-of-truth; qualifying the identity of the true financial controller and the worthiness/risk assessment of engaging with them in business.
When determining the point-of-truth with legal entities, such as companies, public information like ABNs and ACNs make it easier to determine not only that the business is genuine but that it is subject to conditions and compliance standards. Trusts are not subject to the same standards.
Some examples of trusts and their primary purpose:
- Managing charitable donations
- Ring-fencing employee pension plans
- Safeguarding family assets for children
Trust entities aren’t required to publicly disclose trustee/beneficiary/trustor information, therefore businesses might only have view of the trust name, possibly the name of the trustee, and not know the identity of the trustors and beneficiaries who profit from the revenue.
As a signatory to the international agreement to force greater transparency on companies and trusts, as part of The Financial Action Task Force (FATF), Australia has the responsibility of solving the issues surrounding trusts.
In 2016, Pascal Saint-Amans, Head of Tax in the Organisation for Economic Cooperation and Development (OECD) called on countries, including Australia, to establish new registers of company and trust ownership.
“It is clearly important we recognise the important differences between companies and trusts. This means that the solution for addressing the potential misuse of companies – such as [ownership] registries – may well not be appropriate generally.”
The four v’s of big-data
The initial challenge when compiling a trust data registry is to identify how many already exist in the marketplace from a big-data perspective:
Variety: What variety of information does a business own on its accounts versus what is available?
Volume: There are 2.2 million operating businesses in Australia – much of the data relating to these existing businesses lies below the water line. Of these, 530 thousand (one-quarter of the entire business community) are established trusts. Most of which lack the necessary data and information to adequately assess the risk of doing businesses with them i.e. credit lending.
Velocity: It is crucial to be abreast of the ever-changing and growing landscape of big-data. About 15% of data in the business landscape changes every year e.g. a new business is formed every few minutes.
Veracity: Data must be accurate. Accurate matching, accurate scoring, accurate predicting makes data meaningful.
illion’s Trust Registry solving the issue
illion’s approach to solving trust data in Australia spans data & linking trusts to trustees, product delivery and document storing, all built within the Trust Registry, which will finally resolve the enigma trust’s represent to businesses.
The illion Data Registry aims to solve the trust issue by:
Building and enriching data to capture all 530k+ operating trusts through phone interviews, illion logs, natural language processing and analytics and data matching
Trustee data expanded to include bulk washing capability for matching and appending customer’s data sets
Trust Deed document store to supplement illion data with point-of-truth information extracted via optical character recognition. Clients will be able to upload via application programming interface (API), Inteflow or Web Channels. Any non-digital text can be matched and appended via optical character recognition technology
With the gap caused by this trust data frontier closing, businesses can now safely navigate the digital landscape by taking control of their data, making informed decisions, opening themselves up to new opportunities and ensuring increased organisation and data security.