Anti-Money Laundering News and Information

Why Understanding UBO Is Necessary?

Every company has a specific money laundering and terrorist financing risk and must take certain measures against these risks. One of these measures is that companies know who they are doing business with. Therefore, the definition of UBO is significant to understand the Anti-Money Laundering and Know Your Customer processes. Under the AML / CTF Law; Many financial and non-financial institutions such as banks, insurance companies, accountants, and real estate agents are obliged to scan the UBO. In this article, We answered questions like what is UBO, how does UBO affect companies, and why is UBO control necessary?
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What is Ultimate Beneficial Owner (UBO)?

The person who benefits or is positively affected by a company is called the Ultimate Beneficial Owner (UBO). In other words, UBO is the legal entity that is the beneficiary of the company. The person who has UBO status has at least 25% share in the legal person capital, has at least 25% voting right in the general assembly, and have at least 25% of the legal person. Also, Ultimate Beneficial Owner can supervise company operations, control the executive board and even dismiss board members.
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What are UBO Requirements?

The EU has made UBO Check mandatory for all organizations doing business with Commercial customers. Beneficial ownership information is a requirement under the 4th AML Directive in Europe. Hence, different member states have enacted laws for the implementation of reporting requirements. According to the EU 5. AML Directive (5AMLD), member states should establish public records for terrorist activities, company liabilities, and other legal regulations.
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Financial Action Task Force (FATF) has also mentioned UBO requirements. FATF set standards for beneficial ownership from 2003, and in 2012 198 jurisdictions adopted this strengthened FATF standards. However, one of the issues FATF focuses on is the transparency of ownership rules. FATF states that effective ownership rules are complex and not transparent enough. Therefore, Institutions must adopt better technologies and procedures that offer a more forward-looking way to expedite the process.

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UBO Standards for Institutions

There is no doubt, one of the critical questions to ask about UBO is the specific UBO policies and procedures that organizations must comply are? First of all, each country sets obligations for institutions. Organizations need to comply with these obligations and compliance requirements. Also, the primary standards that should be followed by each institution to create an effective UBO program are as follows:

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Understanding Know Your Business

Know Your business is one of the fundamental processes that an organization should implement. Knowing your business partners allows you to identify and prevent future risk situations. For this reason, define all personnel information, especially the Executive personnel. Verify your company registration and executive personnel data. ( company informations such as company name and address).
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Applying AML Name Screening

Performing AML / KYC checks on all individuals with whom the institutions are related is another measure taken against possible money laundering and terrorist financing risks. With AML Name Screening Software, businesses can control their customers by performing sanction, PEP, and adverse media data screening.
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Determining Ultimate Beneficial Owner

Identify the ultimate beneficial owners within the scope of your company and make AML / KYC checks for all persons determined to be UBO.
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Why is UBO Control Necessary?

Organizations such as European public limited companies, European cooperative societies, associations, partnerships, shipping companies, private limited companies, foundations and companies, and other cooperatives are obliged to perform UBO Checks. Failure to implement UBO checks will result in a loss of reputation for companies.

On the one hand, institutions that do not control UBO may unwittingly cooperate with criminals or fraudsters and endanger their company’s future. Therefore, UBO checks must be performed quickly. Besides manual controls, all these operations can be easier achieved through artificial intelligence providers’ screening systems. You can protect your company against loss of reputation by efficiently performing UBO Controls with the AI compliant Sanction Scanner Softwares.
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January 29, 2021, published on Sanctions Scanner

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