Ensure Business Security with UBO Verification for Optimal Protection

Enhance business security with UBO verification, ensuring full ownership transparency and optimal protection against fraud and compliance risks for your organization.

Finding an Ultimate Beneficial Owner (UBO) of a company or simply said UBO verification is really necessary before making any business deal with the company. Many times, it has been seen that the CEO of a company is someone, and the UBO is another person who is the actual decision-maker. According to the studies, it has been found that over $19.5 billion was estimated to be worth the fraud detection and prevention (FDP) system market. Furthermore, $63 billion was exceeded in 2023 for the market projection.

This gigantic number highlights the reason for the business frauds that have been caused by not verifying the UBO of the dealing company. Some organizations administer FDP strategies to dissuade bribery, accounting fraud, and insider trading, which are also potential violations, along with fraudulent insurance claims and identity theft.

This article will delve into the importance of identifying UBOs, the challenges of UBO verification, and then the benefits of revealing their secrets.

Ultimate Beneficial Owner— Who are they?

The Ultimate Beneficial Owner, or simply the UBO, is the mastermind behind the business and the person who is in control of the business but they are not revealed by the company. They are the business owner with more than 25% of the share and are mainly responsible for dealing with other entities on behalf of the whole company. Verifying a UBO is crucial for any business and financial institution as they are the face of the company and have to maintain integrity. The UBOs are not always hidden people, but it takes an effort to identify and verify them.

Why is UBO identification crucial Before Developing a Monetary Relationship?

Business owners are responsible for fraternizing with individuals or companies, and thus, finding out if they are involved in economic fraud, financial crimes, terrorist funding, and money laundering is crucial. Taking sufficient steps, such as UBO verification, to monitor and prevent economic failure can help financial institutions.

The UBO identification and verification are crucial to tackling these tribulations. Therefore, financial institutions and big companies are required to verify the company’s UBO to ensure they are not getting scammed by someone who practices identity theft and money laundering.

KYB Process for Verifying the UBO

The UBO Identification is necessary for regulatory compliance and robust verification of the overall company, which may require extensive research. For in-depth, extensive research, companies can either manually accommodate their verification process or utilize automated technology. The crucial techniques involve the following procedure:

Acquiring Information: Collect the necessary documents from the business, such as shareholder registers, company formation documents, and articles of association, to initial the UBO verification.

Examining Ownership Structure: Analyzing the business hierarchy structure that is examined from the supplied documents.

Identify Influential Stakeholders: Determining the shareholders with significance and the numbers of their ownership shares and percentages in the organization.

Demand UBO Details: Ask for the details of the UBO and inquire about their role in the organization, how much they own a part of the company, and their power in making decisions.

Validate UBO Details: Verify the provided UBO information through reliable sources and government tax databases to ensure their reliability.

Enhanced Due Diligence (EDD): Conduct Due diligence which is further intensified for high-risk clients with complex ownership structures and especially for UBOs.

Ongoing Monitoring: Lastly, continuous observation of the UBO’s actions is necessary to detect the changes and understand the behavior. Also, it helps in evaluating them better and finding out if they are suspicious.

Challenges for KYB Verification For Deterring Business Fraud

Financial Action Task Force (FATF) advises UBO identification as one of its key AML regulations for all businesses. Thus, UBO Verification protects the financial system and curbs illicit activities, including business fraud. The challenge for verifying the UBOs through KYB can be insufficient data quality, which hinders the accuracy of identifying and verifying Ultimate Beneficial Owners (UBOs). This is due to unclear, non-existent, and inaccurate ownership registers, which make verification implausible. Another challenge in UBO verification is the inconsistent, untrustworthy, incomplete, and outdated data. The unavailability and falsity of data hinder the provision of essential information.

Advantages of Identification of Beneficial Owner

Identifying the UBOs is important to preclude the misuse of legal entities for illegal purposes that promote the integrity of financial mishandling. The identification of UBOs is crucial for various reasons, such as restraining fraud, anti-money laundering, and mainly transparency. The identification process compromises on gathering the information of the Ultimate Beneficial Owner, who controls the company and makes the decisions.

If executed manually, the UBO verification process is lengthy, stressful, and time-consuming. However, verifying the UBOs is essential to learning about the organization and helping prevent fraudsters from stealing the funds as investments. By identifying the UBOs behind organizations, one can do business with legitimate individuals.

Wrapping It Up

Ultimate Beneficial Owner is the prominent influential and the key person of any business as they possess 25% or more of the shares and the voting power in the company. Businesses do not like to disclose their UBOs because of the security of their data. However, Financial institutions require the organization to thoroughly perform UBO verification in order to prevent financial fraud and money laundering. The identification of UBOs will not only protect business transactions but will improve tax transparency, legal compliance, and corporate accountability and governance.