Ultimate Beneficial Ownership Verification: Overview & Best Practices

Verification of the business is essential to combat money laundering and terrorist financing. It ensures financial institutions that the company they are onboarding is legal and authentic. This also assists them in complying with the international regulations. However, adequate know-your-business (KYB) checks demand verification of the ultimate beneficial owners (UBOs). It ensures not only the company but also its owners are legitimate. This confirms owner verification through various checks. 

Learn how KYB checks ensure UBO verification by complying with international obligations.

What is Ultimate Beneficial Ownership?

The company has two types of ownership structure: simple and complex. In the simple ones the owner is one person who is funding the business and controlling the operations. Most of this is used in small companies with transparent corporate structures. On the other hand, in a complex ownership structure, there are UBOs, CEOs, or actual owners of most of these used in shell companies. Some various owners or shareholders control teh business and enjoy profit. According to the Financial Action Task Force (FATF) individuals who own 10-25% of the company interest are the UBOs. the threshold of the ultimate beneficial owner depends on the country and regulatory body. 

The anti-money laundering and counter-terrorist financing (AML/CFT) recommend verifying all shareholders who own 25% to secure the integrity of the global economy. For that, financial institutes and companies must collect various documents for identity verification, such as government IDs, driver’s licenses, addresses, account numbers, financial statements, etc., depending on the service they need for institutes.  

How to comply with UBO Verification? 

There are various checks through which a company can verify the UBOs of the business. These are the company owners’ background checks, financial statements attestation, watchlist sanctions screening, and identity verification. Following are the steps that can ensure the UBO check of the company:

Data Collection

First, gather the required data from the company to verify identity and ensure all the data submitted by the business is original. For that onboarding, the company demands the required documents, such as owners’ government IDs, driver’s licenses, financial statements, or address proof utility bills or card payments. This assists the company in making the owner’s profile relative to the business. 

Profile Verificaiton 

Once the owners have all data gathered and sorted by the company, the next step is to verify their documents by cross-checking the written data and attesting security features. These security features depend on the nature of documents, such as the fonts, signatures, borders, and texture in driver’s licenses. The data validation is done by cross-checking the written information from original documents. It ensures the written data on the company-submitted papers is legal, not counterfeit and manipulated. 

Owners Screening 

To ensure the UBOs of the business are not involved in money laundering and terrorist financing. The company must screen the identity of the owners against the sanctions watchlist, such as the AML, CFT, financial criminals, PEPs, Special Interest Entities (SIEs) or other international and national regulatory bodies databases.  The screening against these databases, including adverse media, ensures the owners are not involved in money laundering and related to negative news. 

Perpetual UBOs Check

Companies must constantly check the ownership structure so they get instant alerts about any change. The ongoing monitoring also assists them in reporting any suspicious transactions conducted by the company and their owners. The monitoring ensures they are doing business with a legal company not involved in any negative sector. For the perpetual KYB company, create the centralized report and take monthly business verification steps on the latest information submitted by the business. The monthly attestation clears the company from the hefty penalties from law enforcement agencies.  

Automate Ultimate Beneficial Ownership Verification 

Now, the advanced technology of machine learning and AI makes it easy for companies to automate the whole business verification process. Now, businesses have to submit identity verification documents from anywhere, anytime, and companies only upload documents on software that will provide them with accurate real-time data results. 

Automated processes reduce the company’s time to verify the business identities and offer them minimum cost. Verification with the help of advanced technology ensures error-free results and constant monitoring of the company’s real owners. This also assists in complying with various regulations by algorithm training, which ensures compliance with multiple rules in one click. 

Final Note 

Keep in mind there are different steps and regulations to verify the Ultimate Beneficial Owners of the company. It can rely on company policies or the country’s obligations. These laws constantly change according to updates in technology to prevent financial crimes, and constant monitoring is essential for upholding these rules. 

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