How to Identify UBO within Complex Ownership Structures

Regulated Entities in the UAE are required to identify and verify the ultimate beneficial owner (UBO) to decode the corporate structure. Complex ownership structures are those legal entities whose actual ownership is difficult to identify.

This infographic attempts to showcase how a regulated entity can identify the UBO of a legal entity customer who has a complex ownership structure through the use of various measures discussed.

The UBO Regulations in UAE define a beneficial owner as a natural person who has:

Ultimate ownership, or
On whose behalf transactions are carried out, or
Ultimate effective control over the legal entity in terms of decision-making authority.

Various methods to identify UBOs within Complex Ownership Structure are as follows:

Seek Ownership Information until Natural Persons with Significant Share found

A regulated entity must strive to peel layers of corporate ownership within corporate ownership until the ownership or control can be found with a natural person.

For instance, the if one legal entity is found to be owned by another legal entity or legal arrangement, which is further owned by another legal arrangement, then the regulated entity should make efforts to identify the UBO, who is the natural person or person operating behind the complex web of corporate ownership structures.

Ownership information can be sought through the ‘Know Your Customer’ (KYC) component of the Customer Due Diligence (CDD) process carried out to meet anti-money laundering/ counter financing of terrorism (AML/CFT) obligations of a regulated entity.

The KYC process helps in the collection of necessary documents required to ascertain the UBO of a complex ownership structure.

Beneficial Ownership Verification

It is one thing to identify the UBO, but it is equally important to verify the identity of such a UBO against reliable government-issued identity documents and records.

This helps rule out the possibility of such UBO being falsely identified due to identity theft or forgery.

Scrutinise Ownership Structure of Offshore Businesses

Regulated entities need to be extra vigilant during the identification process of any offshore entity client, as there is always a possibility that criminals use offshore tax or regulatory havens to form legal entities with complex ownership structures to disguise the true identity of a UBO who might be sanctioned individual, or politically exposed person, or an individual having their name in an international criminal watchlist.

Analyse Documents of Legal Entity

Regulated entities must carefully seek and examine the corporate documents of a legal entity customer to identify the trail of ownership and control.

The type of documents that a regulated entity can seek from corporate entity clients can be referred from Know Your Business (KYB) – Key element of AML compliance.

Ongoing Monitoring of Business Relationships

Regulated entities must exercise caution as there is always a possibility that after onboarding a legal entity client, its ownership rights might be transferred from one UBO to another, which is riskier due to being sanctioned or PEP.

To rule out such an event from materialising, the regulated entity must conduct ongoing monitoring of business relationships to ensure that customer details collected during the KYC process, such as ownership structure, share capital, net worth, and the purpose of business remain consistent with the customer profile throughout the business lifecycle.

Scrutinise Reliable Publicly Available Information

Regulated entities, in an attempt to identify and verify the UBO prior to onboarding and after establishing business relationships, need to scrutinise and comb through publicly available reliable information for the following purposes:

To rule out the possibility of any adverse media in the name of the UBO.
To verify or validate UBO information from the government, ministry, or regulator, run websites to conclude the CDD exercise.