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By using some form of nominees (legally or illegally) and structures whereby they cease to be the beneficial owner. For example, if you place an asset in a foundation or trust controlled a third party, you no longer control or own the asset and as such are no longer the beneficial owner. That's an oversimplification and the exact details vary, but that's the gist of it.

Your experience with opening bank accounts is different from more sophisticated structures, whereby it is both legal and possible to not disclose the wealthy individual's identity to the bank.

Wealthy people don't walk into banks, open bank accounts in their own name or a company that they control, and wire money into that. There is a lot more going on behind the scenes. For the right sum of money and as long as they can show that hey have fulfilled their legal KYC/EDD obligations, the banks are in on it.

As you write, the bank will need to know the beneficial owner. The key, then, is to make the beneficial owner be someone else. Legally.

boomy said:

But would you mind to elaborate just a little on this part, maybe just the basic on what such a setup looks like?

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Let's take a trust and company ownership as an example. You own a business and it's doing well, but for whatever reason, you want to no longer be the UBO but you also don't want to sell it outright.

You go to a trustee and draft up a trust deed, whereby you as the Settlor settle the company (or at least your shares of the company) in a trust, which is managed by the Trustee. You might appoint your cousin, best friend, or long-time trusted attorney as Protector of the trust. The Protector's role is to ensure that the trustee does with the entrusted assets what was laid out in the deed. In the trust deed, you can stipulate further control mechanisms to ensure that the trustee doesn't just liquidate the company and run with the money. You can for example mandate that other people you trust hold senior positions or directorship roles within the company.

You no longer own the company and will become irrelevant for reporting purposes, if the whole structure is set up correctly.

Now, the OECD and its ilk aren't stupid. They know about these arrangements and have worked mechanisms into the AEOI/CRS protocol to ensure this isn't exactly as easy as described above. For example, when the company then goes to open a bank account, the Settlor's identity needs to be disclosed (SOF/SOW checks on the trust). To avoid also that, you need to take extra steps, which are tailored to your specific situation, hence the need to work out custom arrangement each time. But that's kind of the gist of it.

Above is a massive oversimplification. I can't stress enough that these arrangements need to be thought out in detail by qualified people. It frustrates me to see certain CSPs selling trusts and foundations for a few thousand, because it gives people the impression that would somehow work. In reality, these setups almost always include several layers and chains of trusts and foundations, Anstalt, Stiftung, SPIC, and all sorts of other arrangements and entities that creative lawyers all over the world have helped write into law.

One of the hardest parts tends to be the return of assets to the Settlor in a way which does not fracture the integrity of the initial trust.