Verify Ultimate Beneficial Owners (UBOs) – KYB Checks
The growing money laundering ratio is a serious concern over the past few years, and regulatory bodies have been trying to identify the reasons behind this issue. Regulators all over the world devise various strategies to combat growing financial crimes, and they find out that less transparency of beneficial owners is one of the major reasons behind money laundering. Therefore, as per the legislation, all businesses have become subject to filing their ownership structure details and reporting it to FinCEN.
Additionally, it is necessary for organizations to utilize Know Your Business (KYB) checks for screening and evaluation of entities they have to work with. Automated AMl checks within the KYB solution provide transparency of company beneficial owners and contribute to overcoming growing financial crimes.
Ultimate Beneficial Owner (UBO) – An Introduction
An ultimate beneficial owner (UBO) is a significant entirety or individual within the business structure and plays a vital role in overall company operations and decisions. A UBO holds at least 25% of total shares of the company. However, the ratio of shares may vary as per the jurisdiction.
UBOs are entities who have significant control over a company and contribute to overall business growth and success. Therefore, before establishing a partnership with any organization or investing in any company, it is necessary to identify and evaluate the authenticity of their UBOs. There are various UBO checks which are necessary to implement for their thorough screening and investigation.
Why is it Necessary to Verify a UBO of a Company?
Financial institutions and other companies that are subject to Anti Money Laundering (AML) regulations must identify and evaluate UBOs of other organizations they have to collaborate with or deal with. It will help in anti-money laundering prevention as UBO identification and screening enable companies to find their nature of working and assets they hold. Many organizations have hidden ultimate beneficial owners (UBOs) who are often part of financial crimes. Therefore, it is necessary to utilise significant measures which can help in UBO screening and evaluation.
As a part of Anti Money Laundering (AML) compliance, financial sectors and companies which deal in commodities, iGaming, Casinos, and forex exchanges are required to follow necessary AML regulations. Additionally. It is very important for all the financial sectors to utilise KYB checks, which can help in detection of ownership structures and ensure transparency of potential organizations a business has to deal with.
How UBOs Serve in Money Laundering?
Many criminals in the form of business entities and companies have hidden UBOs which they cover with complex management structures. It facilitates criminals to transact funds obtained from illicit means for laundering purposes and remain unidentified.
Hidden UBO structures serve criminals in concealing the true source and ownership of illicit funds they obtain from illegal means, which can be in the form of drug trafficking, corruption, and smuggling. Criminals use complex corporate structures, shell companies, and trusts to mask their identities, and they make it very difficult to trace the money back to them. By hiding behind layers of ownership, UBOs enable the integration of dirty money into the legitimate financial system and make it appear legitimate by hiding their actual sources.
This is how hidden UBO structures within the businesses allow criminals to move funds across borders and make them appear as legitimate transactions. The lack of transparency of UBOs is a major factor in financial crimes.
Role of Know Your Business (KYB) Checks in AML?
Know Your Business (KYB) checks are crucial in Anti-Money Laundering (AML) as they help organisations to verify the legitimacy of business clients. Various checks within the KYB process identify the UBOs, and help businesses to understand the nature of their assets. Additionally, KYB checks contribute to assessment risk profile and protect organizations from high risk entities.
The KYB process involves verification of business registration, ownership structure, and conduct due diligence on key personnel. With the help of thorough screening and evaluation, KYB service helps in detection of shell companies, front businesses, and other entities used for illicit activities. It ensures businesses aren’t unknowingly facilitating financial crimes, which can be money laundering or terrorist financing. Moreover, a reliable KYb solution reduces the risk of being exploited by criminals and fraudsters as it works for the transparency of companies before onboarding.
Final Words
A UBo holds a significant share of the company and it has direct control over business operations. Therefore, it is very important to screen and evaluate UBOs of companies a business has to work with. Most of the time, organizations have hidden UBOs who are involved in illicit activities such as money laundering and they can bring serious consequences for associated organizations. UBo screening and evaluation is a necessary step regarding Anti Money Laundering (AML) compliance. With the help of Know Your Business (KYB) checks, organizations can identify UBOs and verify them to find their risk potential and evaluate them in terms of their nature of working and
