In the US, legal authorities stress that businesses must comply with the recommendations of the Financial Action Task Force (FATF). For this purpose, verifying the beneficial owner is vital for the business’s legal position to be identified. UBO beneficial owners, who may directly or indirectly own the company,, must be screened against databases. Within the EU directives, the business must apply the anti-money laundering regulations to be in effect.
To this end, Singapore government officers additionally mandate a register of ownership and the details of beneficial owners to be held by the businesses. In 2021, the International Consortium of Investigative Journalists disclosed millions of documents introducing why offshore firms use tax havens to hide their profits. Politically exposed persons (PEPS), terrorists, and criminals were doing business in shell companies. To eliminate such risks of wrongdoings, UBO identification and verification are necessary.
Who is UBO Ultimate Beneficial Owner?
UBO beneficial owner is a legal entity behind the business that owns or controls it. UBO’s ultimate beneficial owner has a central role in the company’s transactions, so he must be legitimate. Sometimes, a complex web of management structures must be understood to identify UBO; otherwise, there is a risk of financial crime. Beneficial owners may include helpful owners, directors, and company shareholders. Having 25% of the share indicates that UBOs have 25% voting rights to influence the company’s direction.
What Is The Process Of UBO Beneficial Owner Identification?
The usual process to identify the UBO consists of a few primary steps, it involves:
- Collect the data of UBOs, including names, addresses, dates of birth, and photocopies of identification documents.
- Identify and analyze the relevant documents of all beneficial owners.
- Cross-check all the documents against legal authorities’ databases.
UBO beneficial Owner verification is a detailed process of investigating the information of beneficial owners. The term UBO beneficial owner verification implies that the owner is in compliance with the anti-money laundering and counter-terrorism financing regulations.
UBO Compliance With Anti-Money Laundering AML Regulations
Money laundering is one of the most threatening financial crimes to businesses. If the ultimate beneficial owner is involved in money laundering, it can result in penalties such as fines and sentences. The Panama Papers case (2016) highlighted the issue of UBOs involved in money laundering. After that, regulations were introduced and modified in the business world to fight against money laundering.
In Jan 2024, the Corporate Transparency Act CTA was implemented in the US to comply with anti-money laundering AML regulations. According to this, the company has to report to the Financial Crimes Enforcement Network (FinCEN) about the beneficial owner information BOI. This BOI reporting provides complete details of UBO names, addresses, dates of birth, and copies of identification documents. All the collected data is screened against databases to eliminate financial risks.
Advantages Of Accessing UBO Beneficial Owner Information
Corporations must assess beneficial ownership information while onboarding companies. Verifying the data and documents relevant to the industry offers several advantages. In this two-minute read, find a few advantages of beneficial ownership information.
- The identification of UBOs makes remitting risks emanating from financial crimes, such as corruption, bribery, money laundering, and terrorism financing, possible.
- Verification of UBO information leads to protected relationships among businesses for the long term.
- Clarify the vision or intended nature of the business, which builds trust over investors, merchants, and other companies.
- UBO verification builds a reputation in the market, so more companies are interested in doing business.
Final Words
UBO beneficial owners are a crucial part of the business verification. While onboarding teh companies, corporations must identify the UBOs. The documents and information of the UBO are verified through screening against databases. The ongoing monitoring of the beneficial owners is also necessary to keep the relations transparent. According to the Corporate Transparency Act CTA, submitting UBO information to FinCEN is mandatory. It ensures the company’s compliance with AML regulations without any financial risk. If there is any risk involved, UBO beneficial owner ongoing monitoring locates the potential risk. In this way, corporations remain safe from hefty fines and fraud.
