Nowadays, fraud and potential risks after associating with external individuals are becoming excessive in the business world. A wide range of industries are working in the corporate sector a long all kind of financial transaction is proceeding.
As per an analysis of last year, money laundering is estimated to be up to 5% of the total GDP. That’s why it is important to work with companies obligated to AML law nationally or internationally. This leads toward the idea about the consumer or the third party working with them.
Let’s explore more about the Ultimate beneficial owners and why their verification is important for business making the business more compliant.
What Is The Ultimate Beneficial Owners?
UBO stands for Ultimate Beneficial Owner. This term is used for the true persons and individuals who have the right to control and benefit from the shares in the organizations. However, they are not the actual owner of the firm but have proper control or authority within the business and can conduct financial transactions according to the Financial Action Task Force (FATF).
The individual who holds this sustainable post owns a minimum 25% share within the organization, has voting rights, and guardian of minors. A UBO can easily be identified in a company owned by a single merchant, but it can be challenging to analyze if the business’s ownership structure is a bit complex.
It is important to know the difference between the normal employee and UBO within the business. A UBO has financial concerns as compared to normal employees. So, the verification and identification of UBO becomes important for other businesses as it must comply with different regulations and authorities.
What Is UBO Identification?
UBO identification is a process of identifying and investigating the legitimacy and authority of the business as it is the crucial part of the Know Your Business method. Most UBOs want to remain anonymous and hide their presence directly. They are the ones who are involved in suspicious activities like money laundering and terrorism financing.
In this cortex, it is crucial to know about the business working with and ensure the security of financial transactions. Association with other organizations in terms of financial transactions who has bad or illicit activities can ruin the reputation of the cooperate business as well. UBO has a vital importance in Business to business verification procedures.
What Are UBO Verification procedures?
Many UBOs conceal their banned and illicit activities like money laundering and terrorism financing etc behind these shell companies. Before building any business relationship it is important to determine the possible risks and frauds associated with them.
This verification procedure consists of a few steps and provides an extra layer of security for B2B clients. Using UBO businesses can verify other businesses easily.
1. Gather all the necessary documents related to the individual who is in the post of UBO. This includes the consumer’s name, national ID card details, residency, license, and other relevant details. This helps the company to ensure the authenticity of the business. Make sure all the papers are genuine and latest.
2. Once all these papers are collected. The next step in UBO identification is to verify these documents with authentic or legal resources. Also, determine the security factors such as signature, stamps, or other visible security element. These factors may vary on the type of document.
3. Verification of these documents is not enough. Proper paper scanning or investigation to determine the validity or originality. In this regard, convert the written paper into computer-readable text and scan it. This step demonstrates that the written papers stored in government databases are the same.
4. It is so important to know about the UBO source of income and how many parts of the business are associated with the individual. Determine their previous bank transactions to ensure what kind of earnings they have whether they are black money or white.
5. As per KYB compliance demands, business needs to check the sanctions or PEP lists. These are the list of government databases in which banned or illicit organizations are listed to prevent businesses from cooperating with them.
6. Continuous monitoring of UBO statements ensures that everything in the verification process is going alright and nothing illegal is happening. This step ensures whether the individual has modified their given detail or not. To make the process more efficient, demand the monthly latest profile statements.
Ultimate Beneficial owners are the actual person who owns the 25% share in the organization directly and can make business decisions. Verification of UBO plays a crucial role in the company and can easily be investigated with proper identification methodology.
It helps the organisation to keep transparency and secure financial transactions by detecting criminal activities like money laundering and financial terrorism. This helps make businesses more reliable and trustworthy in the world.
Businesses can deal safely with other businesses if they comply with the regulations of different authorities. Businesses must use UBO verification.