Who is the Ultimate Beneficial Owner of a company?

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Chapter 1

What is Ultimate Beneficial Ownership (UBO)?

An Ultimate Beneficial Owner (UBO) is an individual that benefits from or is impacted positively from a company even though they are not formally named as the owner of a business. It is a person within the parent company that owns or controls over 25% of the company shares, has the right to exercise significant control over the company and/or has the right to remove the majority of the board of directors. A UBO is formally defined as a person with significant control at the ‘top of a tree’ in a business.

Whilst companies are increasingly expected to understand who they are doing business with to combat fraud, identifying the UBO is part of Anti Money Laundering (AML) and Know Your Customer (KYC) processes. UBO screening is mandatory for specific industries such as banks, solicitors, estate agents, accountants, etc. under the Money Laundering and Terrorist Financing (Prevention) Act.

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Chapter 1

Why is beneficial ownership so important?

In recent years, the fight against fraud has stepped up, with the 4th and 5th AML regulation coming into play when a company on-boards a new customer. Recommendation 10 from the Financial Action Task Force (FATF) which addresses Customer Due Diligence (CDD), states that financial institutions must identify the beneficial owner and take reasonable measures to verify their identity.

A recent survey conducted by Creditsafe revealed that 37% of businesses surveyed had been a victim of fraud within the last year. It is a very real threat that is rising steadily with time, therefore businesses are now becoming more vigilant in their due diligence to avoid this.

As part of wider due diligence, companies need to ensure their customers do not present a risk to their organisation, whether it be anti-money laundering risk, politically exposed risk or if their business has been previously sanctioned. Identifying the beneficial owner is extremely important in detailed risk assessment practices before a company enters into a new transition with another. Carrying out these checks thoroughly allows businesses to comply with regulation, and from a reputational standpoint, businesses need to know who a UBO of a company is to combat fraud for the safety of their own business.

Criminals have long used complex corporate structures to defy the law and carry out criminal anti-money laundering activity. Compliance laws including UBO screening have been implemented to deliver complete transparency in KYC policies.

Businesses need to have a robust, risk-based and auditable process that can identify who exercises ultimate effective control over legal persons. 

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What do I need to know about a beneficial owner?

To know your customer, you need to know who the UBO is to effectively know who will be benefitted from transactions with your company.

The data sources you need to screen a beneficial owner against are:

  • Corporate ownership structure 
  • Shareholder and subsidiaries 
  • Politically Exposed Person(s) (PEP) lists
  • Sanction lists
  • Sister companies with the same ultimate owner, in the same group structure
  • Inspection lists
  • Beneficial ownership vs perceived ownership
  • News and media regarding that company
Ultimate Beneficial Owner
Chapter 1

How can Creditsafe help verify a UBO?

Creditsafe offers a range of products that will help your business adhere to regulatory compliance and verify the Ultimate Beneficial Owner of any company.

Creditsafe’s Risk and Compliance streamline the process of identifying the UBO, alongside running PEP & Sanction checks, AML checks and offering news reports regarding the company in question. Matching data to various sources including Lexis Nexis world compliance, Creditsafe’s risk and compliance reduces the manual hours of your on-boarding process by managing multiple policies for multiple jurisdictions, thus also reducing human error.

Our tool has a single view of a customer from multiple data sets. Complete with a full dashboard to manage your portfolio, get a click by click, time-stamped audit trail on all your compliance checks. 

You can also access a directory of local UBO registries and definitions throughout different territories in our UBO registry Guide.