It is generally still easier in the Czech Republic than elsewhere in the EU to hide crucial parts of corporate structures – including the ultimate beneficial owners of a business – from public scrutiny. While registering a business in a non-transparent tax haven is one way for owners to hide their identities, a growing number are taking a more brazen route: paying so-called “white horses” – often homeless people – to act as frontmen.
According to the consultancy Bisnode, there are currently more than 14,500 business registered in the Czech Republic to people whose home address is a local town hall. Apart from entrepreneurs who have no permanent address there are nearly 10,000 companies with homeless people acting as frontmen or proxies, known in Czech as “white horses”.
Zdeněk Demeter, Big Data & Analytics Business Manager at Bisnode Czech Republic, explains.
“Behind these firms can also be bankrupt businessmen, who in some cases may play the role of ‘white horses’. Deploying a white horse basically makes it difficult to uncover the real ownership relationships in the companies. And it also fundamentally complicates the scrutiny or due diligence of their business partners.”
According to Bisnode, about one in four such companies is registered in Prague – where they are statistically less likely to be audited. More people have registered in the Prague 4 district town hall than in any other in the Czech capital, 324 at last count, but Prague 1 is becoming increasing popular, rising 131 percent since the last study, to 164 in total.
Statistically, these “homeless”-run companies are more likely to run afoul of tax authorities, for example, by not paying VAT consistently.
“It’s the same if we look at negative events, such as insolvency, financial execution or bankruptcy of those companies. In the case of ordinary companies, 1.6 percent of them are at risk, while if we talk about the ‘homeless’ businesses or ‘white horses’ leading the companies, it is radically more – 5.1 percent of the total. This means that these companies are significantly more risky than the others.”
On the global scale of offshore business schemes, the Czech Republic also looms large. Nearly 300 Czech clients and shareholders appeared in the so-called Panama Papers and more than a quarter-million documents in the Mossack Fonseca trove had a Czech connection. Many used “bearer shares,” which offer the greatest possible anonymity because no names are attached to the certificates.
If the corporate structure is opaque, the money going into it – even public funds – can be untraceable, and the end-owner or ultimate beneficiaries hidden. This possibility lies at the heart of an ongoing European Commission investigation into the conglomerate Agrofert, founded by Czech Prime Minister Andrej Babiš, which he has placed in trusts.
While the new EU regulation on Anti-Money Laundering forced member states to introduce registers of beneficial ownership, different countries implemented it differently. Some, like Slovakia, allowed those registers to be fully open to the public – to journalists, NGOs, the opposition – but the Czech register is open only partly, to the police, investigators and tax authorities.
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Some 10,000 Czech businesses fronted by homeless “white horses”