The Ultimate Beneficial Owner and Business Background Checks

Posted by Jason Norman on November 18th, 2022

Having an ultimate beneficial owner background check is an important step in ensuring that your business is operating by legal and regulatory obligations. When you conduct this type of check, you can determine if the owners of your business have the necessary legal authority to carry out transactions on your behalf.

AML/CTF risk assessment

Performing a comprehensive Ultimate Beneficial Owner (UBO) business background check is the only way to ensure AML compliance. The complexity of the legal structures of businesses, coupled with the lack of beneficial ownership transparency, makes it difficult to track illicit assets and investigate ML/TF offenses. The ultimate beneficial owner is anyone with 10% to 25% capital ownership or voting rights in a company.

For financial institutions, establishing beneficial ownership transparency is important to prevent ML/TF offenses. Increasing beneficial ownership transparency is also beneficial for reporting entities and investigative authorities.

Financial institutions are exposed to financial and reputational risks due to poor AML compliance. They must monitor their activities for money laundering and terrorist financing. The monitoring of these activities includes surveillance of employees, market trends, and various activities.

Identify the natural person(s)

Identifying the natural person(s) behind the ultimate beneficial owner is a must if your company is in the financial services business. In some jurisdictions, financial institutions such as banks and brokerages must complete a comprehensive, multi-faceted, and robust background check on all clients. The process is a bit cumbersome, but the benefits are well worth it. The resulting information can be used to identify red flags and potential nefarious activities. This is especially true of customers with credit card balances and bank accounts with unauthorized signatures.

Aside from a thorough background check, there is a litany of other ways to detect fraud, ranging from a simple form of data collection to more complex techniques, such as the use of electronic payment systems to authenticate customer funds and account numbers.

Verify the information on the Beneficial Owner and Controlling Person form

Whether you are a financial institution or a trader, you need to be aware of the benefits of collecting beneficial owner information. Knowing who owns your company can help you combat fraud and keep you in compliance with regulations.

Knowing who owns your company can be a challenging task. You may find yourself digging through layers of opaque ownership structures. You may need to use an automated solution to save you time.

A Benefits Owner is anyone who holds shares in your company. The best way to find out who owns your company is to run a business verification check. You can use the bronID Portal to do so.

Is the information accurate and up to date?

Obtaining the information needed to conduct an ultimate beneficial owner business background check can be tricky. The industry standard for AML/KYC compliance is to ensure that individuals involved in the transaction are properly identified and verified. While the names of individuals involved in a transaction are not always the actual beneficial owners, it is still wise to keep a record of the relevant information.

In addition to obtaining the name and address of a potential owner, it is important to also verify that the entity is indeed a bona fide entity. For instance, if you are conducting due diligence on a prospective hedge fund, make sure that you are looking at the names and addresses of the fund's senior management officials, not just the fund's principals.

Assess the risk posed by the beneficial owner(s) of your non-individual customers

Identifying the 'beneficial owner' of your non-individual customers is a legal obligation for all reporting entities. Unlike individuals, business customers carry different risk factors. So, while a single person is responsible for the big picture, the responsible parties may be spread across multiple layers of the organizational structure. The key is to understand who is ultimately responsible for the money they receive.

There are several techniques available to identify the 'beneficial owner' of your non-individual customers. One option is the bronID portal. This is a software solution that allows users to verify the 'beneficial owner' of their business customers. The software will show you who the 'beneficial owner' is by displaying a 'Bron ID' and will even allow you to compare the identity of the 'beneficial owner' to that of your other business customers.

Create an effective UBO program

Creating an effective ultimately beneficial owner business background check is a vital part of AML compliance. Ultimate Beneficial Owners are individuals who benefit from a business transaction. These individuals may be involved in money laundering, corruption, and tax evasion.

A UBO is an individual who holds at least 10 to 25 percent of a company's shares. Ultimate Beneficial Owners are also required to be disclosed to the authorities, regardless of whether they are direct or indirect beneficiaries. Financial institutions, such as banks, are required to perform an ultimate beneficial owner check. Professional services, such as brokerage firms, futures commission merchants, and hedge funds are also required to disclose the ultimate beneficial owners.

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Jason Norman

About the Author

Jason Norman
Joined: February 24th, 2020
Articles Posted: 437

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