Ultimate Beneficial Owner (UBO) identification important, increasingly complex, requires integrated data solutions and automation

by Sep 1, 2021

Ultimate Beneficial Owner (UBO) identification important, increasingly complex, requires integrated data solutions and automation

 

Gropay - UBO Identification

 

Identifying UBOs is important but costly for Regulated Entities

 

Identifying and verifying UBOs is essential for regulated entities to maintain compliance with their license conditions. However complex ownership structures across multiple global regions makes UBO identification time consuming and costly.

 

Automation and integrated data sources can offer a solution

 

It is possible however for regulated entities to simplify the process for UBO verification through the use of integrated data sources and automation. Doing so reduces time, manual effort, costs and exposure to risks of facilitating money laundering or other criminal activity.

 

Definition of a UBO

 

A UBO is:

  • Someone who owns or controls a majority (>25%) of the shares or voting rights in a company and / or
  • Someone who has the right to appoint or remove the majority of the board of directors and/or 
  • Someone who has the right to exercise significant control or influence over the company. 

 

Importance of identifying a UBO

 

Globalisation has meant that complex corporate structures and offshore entities are becoming more and more common. In most cases such structures have valid legal or operational reasons for the entity being assessed. However such structures can also be used by individuals that want to conceal their identities or the source of their funds. To avoid this regulated entities need to thoroughly verify the UBO of entities being assessed. Not doing so can mean that the regulated entity is non compliant and can face heavy regulatory fines and damage to their reputation.

Regulators around the world continue to increase their focus on fighting money laundering with the European Union’s  5th Money Laundering Directive (5MLD) placing emphasis on broadening UBO registers and their transparency.

 

Difficulties in determining UBOs

 

As mentioned earlier, ownership structures can be complex as a function of globalisation or valid business or operational reasons but that complexity can also be used by bad actors to hide their identity or source of funds.

 

Efficiently determining UBOs is made even more difficult by a number of factors:

 

  • Regulated entities not clearly defining and documenting their customer profiles, risk appetites, due diligence and enhanced due diligence triggers and processes.

 

  • Ongoing monitoring after initial on-boarding to ensure continued compliance is usually not done or if it is, is a highly manual process and as a result fraught with errors and high in costs.

 

  • Changes in structures and individual profiles are difficult to map out in a monitoring capability.

 

  • Data for complex structures is often fragmented in content and format and difficult to analyse and process.

 

  • Many regulated entities take a reactive approach to UBO identification and do not invest sufficiently in technology to link external and internal data sources. Use of mainly manual processes introduces human error.

 

  • Processes are built around the worst case scenario and so reduce the experience of the majority of well intentioned customers attempting to on-board.

 

Automation and integrated data sources

 

Building automated processes and workflow capabilities to take care of normal scenarios so manual effort can focus on managing exceptions is key to efficient UBO identification.

These processes being able to ingest data from multiple sources and in multiple formats is essential for their operation.

Data storage and management to provide a total view of the entity and easy retrieval and update capabilities is important for ensuring ongoing data accuracy and compliance.

 

Conclusion

 

Identifying and verifying UBOs is essential for regulated entities to maintain compliance with their license conditions.

However complex ownership structures across multiple global regions makes UBO identification time consuming and costly.

It is possible however for regulated entities to simplify the process for UBO verification through the use of integrated data sources and automation. 

Doing so reduces time, manual effort, costs and exposure to risks of facilitating money laundering or other criminal activity.

 

Want a free consultation on improving your UBO identification processes? Contact us or a no obligation chat.

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About

Gropay provides management consulting and interim management services globally in the areas of online payments, mobile payments and point of sale POS payments. Our clients span the entire payments value chain from schemes to merchants and also include private equity investors, technology and mobile companies. The Gropay team consists of proven industry leaders with extensive experience both on the demand (merchant) and supply (Payment Service Provider, acquirer, scheme) sides with a focus on sales and business development, operations, risk, compliance, valuation and due diligence.

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