The Ultimate Beneficial Owner, shortly known as UBO, defines the company's beneficiary's legal entity which requires significant control in terms of KYC processes. According to the regulator, banks, investment, insurance, and other financial companies must detect the UBOs they work with. The most important reason is to prevent serious crimes such as money laundering and terrorist financing. The lack of disclosure of UBOs paves the way for people to launder money through companies. Therefore, countries should pay attention to UBOs to fight against money laundering and terrorist financing.
Who Is Ultimate Beneficial Owner (UBO)?
- People who have at least a 25% stake in the capital of the legal entity
- People who have at least 25% voting right in the general assembly.
- People who are beneficiaries of at least 25% of the capital of the legal entity
Financial Action Task Force (FATF) and the European Union agree that working with Ultimate Beneficial Owners increases the risk of facing financial crimes such as money laundering and terrorist financing. AML regulations include ultimate beneficial ownership regulations for all financial institutions. The EU had released the Fifth Anti-Money Laundering Directive (MLD5) to make financial transactions more transparent. According to MLD4, UBO screening must include senior managers and higher ranks.
The ultimate Beneficial Owner, meaning is the person or entity that is the ultimate beneficiary when an institution initiates a transaction. The beneficial owner is the natural person who, ultimately, is the person on whose behalf a transaction is conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement.
The issue of UBO or controllers has become more critical internationally: it plays a central role in transparency, the integrity of the financial sector, and law enforcement efforts. Beneficial owners are always natural persons who ultimately own or control a legal entity or arrangement, such as a company, a trust, a foundation, etc.
Is Ultimate Beneficial Owner Scan Mandatory for Companies?
Reputation is significant for companies because their reputation affects customers' trust in the company. Therefore, they want not to be on the agenda with bad news and protect them from the factors that will harm their reputation. Collaborating with fraudulent companies or not meeting AML requirements will cause them to face fines. This leads to the loss of the company's reputation.
One way to avoid this is to do a UBO scan. It is a mandatory process for companies that are responsible for anti-money laundering and counter-terrorist financing laws. The companies check the counter company's directors by scanning the UBO in their business agreements. This screening determines whether the company's owners or shareholders will pose a problem for them. Companies performing UBO scanning may decide not to make business deals with high-risk companies to maintain their corporate reputation.
Companies that do not perform Ultimate Beneficial Owner scanning face various risks. Failure of a company to carry out UBO checks causes it to fail to detect risks. For this reason, they may cooperate with criminals or fraudulent individuals without realizing them and may harm company reputations. In addition, those who do not perform UBO checks are punished by regulators according to AML laws if they are under the AML / CFT obligation.
Companies can perform UBO verification in seconds with the Sanction Scanner. They can scan owners and shareholders of companies in business deals between AML and PEP data from 220+ countries and identify risks. Protect your company's reputation, comply with ultimate beneficial ownership regulations, and ensure AML compliance by scanning the beneficial owner. You can contact us or request a demo for detailed information about Ultimate Beneficial Owner (UBO) Screening.