The Complete Guide to the Ultimate Beneficial Owner Verification
Ultimate Beneficial Owner (UBO) Verification
As per the KYC onboarding and remediation process, customers must be verified for Ultimate Beneficial Ownership. It is necessary to comply with AML/ CTF sanctions and regulations and meet the tax compliance legislation and standards. UBO is defined as an individual who benefits the most and has ultimate effective control over an arrangement– a legal entity or a natural person, irrespective of the chain of control is UBO – Ultimate Beneficial Owner. UBO check is necessary for different entities such as banks, brokers or dealers in securities, commodities, hedge funds, futures commission agents, blockchains, currency exchange officers casinos, digital lenders, FX, and binary options brokers
s are in trend nowadays across the world. People are using these digital assets as investment vehicles or for the exchange of value. There is a sudden rise in its adoption. Parallelly, there is a rise in innovations in financial infrastructure for securing cryptocurrencies.
The legal arrangements are complex, and detangling them is also cumbersome. Several factors hinder UBO verification, such as lack of clarity on multiple beneficial ownership outlines, non-co-operation, and other factors that make it difficult to carry out the process quickly and prevent compliance with the KYC process.
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UAE Cabinet Decision No. (58) of 2020 Regulating the Beneficial Owner Procedures
- 25% or more of the legal person’s share capital;
- or 25% or more of the legal person’s voting rights.
Final CDD Rule
The CDD final rule amends the Bank Secrecy Act regulations, which improves financial transparency; It will help prevent money laundering and misuse of legal entities to hide the illegal activities of funding criminal and terrorist activities. The CDD rule works on four elements which require financial institutions to maintain written policies and processes to perform the following functions-
- Identification and verification of the customers’ identity.
- Identification and verification of the UBO of the companies opening accounts.
- Create a Customer Risk profile by understanding customer relationships.
- Regular monitoring of transactions to detect and report suspicious transactions. Update the customer information regularly.
Any individual who owns 25 % or more of a legal entity and the individual who controls the legal entity must be subjected to verification of beneficial ownership information.
UBO International Standards
Ultimate Beneficial Owner Step-by-Step Process
1. Obtain the firm's credentials
2. Identify Ownership Structure and Percentages
3. Identify Beneficial Owners
Identify UBO by determining the entity or natural person’s ownership interest or management control – total percentage of shares, ownership stake, management control, and verify if any of it falls under the ambit of UBO UAE.
4. Perform AML/KYC checks on all persons identified as UBOs.
UBO and AML Compliance
Automated solutions are the futuristic way of compliance with the AML/ CFT requirements as they make the detection and validation of UBOs a seamless and quick process. AMLUAE can help you with compliance with the AML/CFT requirements. Contact us to know more about assisting you with AML/CFT compliance.
Check out how to find UBO of a company
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A UBO is an individual having significant control over the business through shareholding or voting rights. A UBO must have at least 25% shareholding (direct or indirect) in the company, the right to vote, and the right to appoint or dismiss directors/managers. An individual/s holding such control is your UBO.
About the Author
CISA, FCA, CS, DISA (ICAI), FAFP (ICAI)
Pathik is a multi-disciplinary professional with more than 22 years of experience in compliance, risk management, accounting, system audits, IT consultancy, and digital marketing. He has extensive knowledge of Anti-Money Laundering rules and regulations, and he helps companies comply with legal requirements. Pathik also helps companies generate value from their IT investments.