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An ultimate beneficial owner – or UBO – is a
person who ultimately has control over an arrangement, or control over a person
during a transaction. The UBO is also the party that stands to benefit the most
from the said transaction. Here are a few examples of individuals that could qualify
Power of Attorney
Legal guardian of an underage
Someone with formal or informal
control of an account holder
Implemented in 2017, the EU’s 4thMoney Laundering Directive (4MLD) also addressed the definition of an ultimate
beneficial owner. This directive stated that anyone who has over 25% of the
shares or voting rights in a legal entity must clearly be considered a UBO. As
well as this, 4MLD determined that all senior managing officials could be
treated as UBOs, if it couldn’t be confirmed that they met any of the other criteria.
for UBOs is usually a three-step process, and once an ultimate beneficial owner
has been identified, a KYC check will need to be performed. We break down the
three stages of finding a UBO below:
Take a look at the firm’s credentials.You should be able to verify their company name, and check that their records include
details like address, status, and a list of the most senior employees.
Examine the chain of ownership. This
might require a bit of research. You’ll need to identify anyone who has a
sizeable percentage of the shares or voting rights, and work out if they’re
direct or indirect owners.
Find the ultimate beneficial owner. See
if any of the individuals you identified in the previous step qualify as ultimate
beneficial owners, according to the UBO definition laid out in 4MLD.
is easy with SmartSearch – as we’re now fully integrated with Experian’s
industry-leading ultimate beneficial owner database. That means you can use our
full service AML platform to identify potential UBOs, before you carry out any
If your firm falls
within the financial services sector, or one of the other categories that has
to follow AML regulations, you’re legally obliged to identify UBOs as part of
your compliance effort.
By discovering any
ultimate beneficial owners, you’re helping to prevent financial crimes like
money laundering from taking place disguised as corporate investments or
transactions. Identifying the UBO effectively allows you to ascertain who may gain
the most from financial malintent, as well as who could be most vulnerable to
After a UBO has
been successfully identified, you’ll need to establish what level of risk they
pose to your business. UBOs tend to be sorted into three different risk levels,
ranging from low, to mid and high risk; each of these levels require a different
With low-risk UBOs,
enhanced due diligence isn’t necessarily required. Instead, you’ll need to ask
them to sign a statement which provides all of their key personal details – you
can then use this to confirm the individual’s identity via electronic ID verification.
qualifies as a PEP (politically exposed person) would be considered a mid or
high-risk UBO, and so would any individuals who show signs of historic – or
current – involvement in terrorism financing, money laundering, or other
In line with
recommendations made by the FATF, enhanced due diligence (or EDD) should be performed on every mid to
high-risk UBO you identify. Your EDD process might include the following
Carrying out additional searches, and
using a wider variety of sources.
Evaluating any discrepancies between
the individual’s overall net worth and general source of income, until
you’re satisfied that they’re not benefiting from the proceeds of
Gathering sufficient information to
inform a thorough understanding of the risk this UBO poses.
Asking the individual to provide you
with regular updates, should any significant changes in ownership take
It’s worth noting
that every firm which follows AML regulations should have its own risk-based
approach to AML compliance, and is therefore likely to have a slightly
different EDD process in line with this.
In July 2018, the EU’s 5th Money Laundering Directive came into place. 5MLD is predominantly known
for its tighter focus on virtual currencies, e-money products and increased due
diligence in high-risk countries, but it also included a significant update on
the subject of ultimate beneficial owners.
5MLD states that
UBO lists (which were originally drawn up under 4MLD) are now required to be
public, so the information is available to all EU member countries. As a result
of this update, every financial-sector company in the UK is required to
disclose the ultimate beneficial owner, so it can be added to a central
register. These UBO lists, and the widespread availability of them, should be
implemented by the end of June 2021, which is the deadline for this directive.
Just six months
after 5MLD was announced, the EU published 6MLD – a follow-up directive that
aims to further reinforce the European Union’s defences against money
laundering and financial crime.
the harmonisation of various definitions and processes across all EU member
states, to improve consistency in both how AML risk is managed, and what
qualifies as a money laundering offence.
However, as a
direct result of Brexit, the UK isn’t obliged to implement this next set of
money laundering regulations. In fact, the UK has opted out of the majority of
this legislation, on the basis that many of the required changes have already
been written into UK law.
In short, while the
UK has ceased to be an EU member state, relevant firms within the UK are still
required to comply with new AML regulations, like disclosing a UBO. Failure to
put sufficient compliance measures in place could even result in penalties from
the Financial Conduct Authority (FCA).
earlier, every business in the financial sector is obliged to keep up with
recent AML regulations, like the EU money laundering directives. Within these regulations,
there is guidance on the different compliance measures which firms must
implement, like adopting a risk-based approach, and carrying out AML checks on
all potential customers and clients.
One of these
compliance measures is the identification of UBOs within a corporation
structure. As UBOs are the individuals who stand to gain the most from corrupt
financial activity, establishing (and monitoring) UBOs is a key part of AML
compliance, and contributes to the global effort against money laundering.
As a SmartSearch
customer, you’ll not only have access to the Dow Jones Watchlist for ID
verifications and AML checks, but also be able to quickly and accurately
identify UBOs using Experian’s Ultimate Beneficial Owner database.
You can find the
UBO feature on the ‘Structure’ page when you search for an LLC or PLC in your
account. When you look for a UBO, we’ll return three categories of results to
Individual UBOs. We’ll show you any individuals within
the corporate structure with over 10% of the total shares or voting
Director UBOs. If any of the individuals with over 10%
of the total shares or voting rights are also directors, we’ll flag that
Additional entities. In this section, we’ll list any other
companies in the structure which have a share in the business.
Once a UBO has been
successfully identified, you can then carry out a full AML check on that
individual or entity – including sanctions screening and customer due diligence
– to make sure they don’t raise any compliance flags before you go into