What is a UBO?
The Ultimate Beneficial Owner (UBO) refers to the ultimate person who owns a business, or on whose behalf a transaction is being conducted. UBO is generally someone who owns over 25% of a company’s shares and has significant control over the company. Identifying the UBO is a key step in KYC, KYB and AML procedures, for preventing financial crimes like money laundering and terrorist financing.
The UBO of an organisation can be identified as someone
- who owns more than 25% of the company’s shares
- who controls than more 25% of the voting rights
- who is a beneficiary of at least 25% of the organisation’s capital
- who is a shareholder, including those with bearer shares that can be transferred anonymously
Why is identifying the UBO important?
Identifying the ultimate beneficiaries of an organization prior to establishing a relationship is very important for companies in the financial sector. This is because associating with fraudulent companies can lead to a bank or financial institution being indirectly a part of financial crimes, which ultimately affects the finances and reputation of the firm. Along with this, identifying the UBO is a key step in AML compliance, and failure to comply with this results in hefty fines.
Due diligence while identifying the UBO is necessary to ensure that a bank or financial institution does not inadvertently assist in financial crimes and also protects a firm from investing too much time and finances in building a partnership with someone with a history of fraud.
Who needs to perform a UBO check?
Any organization that does business with other companies, be it in the financial domain or not is greatly benefited by doing a UBO check. Complying with the UBO procedures protects a bank or financial institution from financial crimes.
Some key sectors that necessarily require UBO checks are:
- Fintech
- Cryptocurrency and Blockchain
- Financial Institutions and Banks
- Insurance
- Telecommunications
- Real estate
- Audit and accountancy
How to perform a UBO check?
There are numerous steps involved in verifying the UBO of an organization, which include:
- Obtain the company’s credentials: The first step here would be to obtain the organization’s credentials, which include the following details:
- Organization name
- Incorporation date
- Address
- Company status
- Top management employees
- Determine ownership chain: The next step is to identify the major shareholders and verify their direct/indirect ownership.
- Identify the UBO: From those with major shares and management control, the UBO with the greatest control over shares and other beneficial ownership has to be identified and their details must be verified against sanction lists and PEP (Politically Exposed Persons) lists.
- Perform KYC and AML checks: All the identified UBOs then have to undergo a KYC and AML check for further verification.
How can uqudo help identify your client’s UBO?
uqudo’s identity verification solution has access to monitored lists which helps in identifying individuals on sanction lists, money laundering global lists and other financial fraudsters. Along with this, we check UBOs against details of 1.7+ million PEPs and identify risks. Our AML compliance program does ongoing checks, protecting your firms from financial crimes. To learn more, get in touch with us
