Significance of Ultimate Beneficial Owner Verification

The identities behind businesses have a specific share in the assets and a high percentage of voting rights. These identities may be beneficiaries, directors, and shareholders of the company. The person or group behind the company, usually with more than 25% share, is considered the ultimate beneficial owner (UBO). While building financial relations, it is highly crucial for a business to identify the UBO in a partner company. Identifying the beneficial owner is quite challenging in multi-layered companies; however, unidentified UBO is exposed to financial risks. Therefore, it is necessary to verify UBO in a partner company while making healthy financial bonds. 

Understanding Ultimate Beneficial Ownership

The concept of ultimate beneficial owner identification depends on the country’s jurisdiction. The UBO holds a significant share of the company, which varies among countries. The UBO, with a high percentage of shares and rights, has a significant role in the company’s activities. If the UBO is involved in money laundering, corruption, terrorist financing, bribery, and other financial crimes, it is vulnerable to partner companies. The suspicious activities of the UBO indicate fraud risks to the business partner. Additionally, the international regulatory body requires businesses to must file their beneficial ownership BOI reporting. The BOI reporting is a way forward to ensure legitimacy in the business world. 

UBO Ultimate Beneficial Owner Verification Process

In establishing the business bonds, it is necessary to identify the partner company’s UBO. The UBO identification helps to prevent and detect potential risks. The UBO verification consists of the following steps: 

• The first step of the ultimate beneficial owner UBO verification is to collect its details, including his name, physical address, contact number, and photocopies of passport ID or driving license. 

• The documents including proof of residential address, register of directors and shareholders, shareholder agreements, financial statements, bank statements and tax returns are collected to to check the financial status of the ultimate beneficial owner UBO.

• All the collected documents are screened against official databases of government and regulatory bodies.  

• Conduct background checks on the company to detect whether it has a history of black money or any sort of fraud case. 

• Ongoing monitoring of the company is required to detect any modification in the status of the ultimate beneficial owner.  

UBO Verification and Shell Companies 

In a shell company, there is a policy to hide the details of the ultimate beneficial owners for tax evasion. An investigator cannot find the money trail of the shell company therefore they are highly exposed to financial crimes. UBO verification is inevitable while onboarding the shell company. The corporation must understand the importance of UBO verification to mitigate financial risks and threats.  

AML Screening 

Money laundering remains a major concern for any company’s revenue as well as its position in the market. The suspicous activities, such as money laundering, badly affect the partner corporation. Therefore, it is necessary to apply anti-money laundering AML checks over UBO at companies onboarding. AML checks ensure that UBO is compliant with the laws to avoid non-compliance fines, sanctions and other sentences. 

Example of Panama Papers 

The threat related to the guilty ultimate beneficial owner ubo cannot be described without the mention of Panama Papers. The Panama Papers was leaked in 2016 by the International Consortium of Investigative Journalists. This paper reveal some of the beneficial owners’ lists of offshore companies. Several well-known personalities such as the British PM, David Cameron, were involved in unlawful relationship.  

UBO Background Check 

Applying background checks over the UBO to the identified and verified him is the final stage of the verification process. This assists in identifying the fraudsters, criminals, and PEPs posing as UBOs. Corruption and money laundering have become such criminal entities that infiltrated the ownership of such companies. 

Furthermore, the use of the UBO checks not only minimizes the financing of a company but also saves its position. When an organization onboards a company that is indulged in money laundering, there are legal consequences. For instance, the partner company can be penalized, receive fines amounting to millions of dollars, and fraud. However, it reduces the financial risks and saves the company's reputation from the personal interests of the UBOs. Finally, there will be more possibilities to encourage a greater number of companies to establish healthy financial relations with that. 

Final Thoughts 

Ultimate beneficial owner UBO verification is essential in establishing a company’s legal partnership and, hence, should be conducted to identify the UBOs. All the UBO information related to the industries is collected and checked for verification. UBO check plays an important role in analyzing the financial position and identifying potential risks. They are performed over UBO to identify risks concerning the entity and its legitimacy. In onboarding processes, using a UBO check decreases the probability of fraudster identification while building long-term financial relationships.