Exploring the Role of Group Structure in UBO Ownership for KYB Compliance

With businesses operating as multinational corporations and complex business ownership structures, merely examining surface-level ownership is no longer sufficient to ensure robust due diligence. Many businesses may feel confident in their KYB (Know Your Business) process after validating the registration, verifying the business address, and maybe even checking the shareholders. But out of left field comes the real risk!

If you’re not mapping the group structure, there’s a good chance you’re missing the real Ultimate Beneficial Owner (UBO).

The person exercising control over the entity may not be immediately apparent during the initial level of scrutiny. However, if that individual is a Politically Exposed Person (PEP), subject to any local or international sanctions, or associated with criminal activity, the organization will ultimately be held accountable for compliance failures when regulators intervene.

Key Challenge: UBO Identification is Incomplete Without Group Structure

Most Know Your Business (KYB) compliance strategies only extend to identifying shareholders who own 25% or more of the business. This is also where the regulatory requirement ends, and where the real risk begins. 

Let’s unpack it:  A shareholder on paper may very well be a nominee – someone holding the share on behalf of someone else.

For example, a business may onboard a client with a holding company that owns 30% of the shares, but who owns the holding company? This is mostly where the visibility ends, and the risk begins.

Ownership can be fragmented with 15% here, 10% there, but voting agreements and family connections may still give someone operational control without holding any formal ownership.

On paper, the UBO appears to be identified. But in reality, it may be just a front, shielding the identity of the true owner.

And this isn’t just a theoretical risk real-world cases have exposed how easily true ownership can be hidden through layered structures.

Credit Suisse admitted to helping clients obscure beneficial ownership by layering control behind proxies, such as a case where an elderly woman held an account, but her son was the real owner. The result? A $511 million fine for enabling clients to hide over $4 billion in offshore assets.

Not identifying the real persons due to layered group structures creates massive vulnerabilities:

• Regulatory non-compliance: A business entity may appear low risk on paper, while the real owner may be several layers deep and could be on the sanctions list. 
• Poor risk assessments: A business could be assessed without knowing who is actually running that business.
• Operational exposure: A firm may give access to financial infrastructure, completely unknowingly, to someone with a criminal, terrorist, or political connection.  

The Role of Group Structure in Fixing This Gap

So what is a group structure, exactly? It is the entire organizational tree of related businesses – subsidiaries, parent, holding, and sister companies – that together run the complex ownership web.

In many cases, the ultimate beneficial owner (UBO) is not within the direct group structure of the company being onboarded. Of course, they can be:

• In a private trust in a different jurisdiction
• In a holding company, three levels above
• As a silent investor through an offshore entity

Consider this example. You are onboarding BlueSky Tech Ltd, which is based in Germany. On paper, its shareholders are:

• GreenHaven Holdings Ltd (60%)
• Horizon Ventures (40%)

No red flags appear at the surface level. However, a comprehensive due diligence reveals: 

• GreenHaven is owned by a firm based in Dubai.
• That Dubai firm is controlled by a trust based in Panama.
• The beneficiary of that trust is a politically exposed individual (PEP) from Russia, and someone whom the EU sanctions.

Group structure provides this level of insight into UBO ownership, and this matters because:

• Regulators are no longer interested in the ownership of 25% shares, but want to know on whose behalf the control exists, whether this control is direct or indirect.
• The Financial Action Task Force (FATF) and EU AML directives emphasize the importance of understanding control mechanisms beyond mere ownership thresholds.
• Companies that do not have a registered business number and do not identify indirect UBO are likely to face fines; may have a risk of reputational damage; and worst of all, financial exposure to risks they cannot see.

Mapping Group Structures to Identify UBOs

Corporate structures aren’t as straightforward as they used to be, and traditional KYB checks often stop at the surface. That is where modern KYB solutions come in. The real challenge is not just noticing that a group structure exists, but being able to untangle it automatically, at scale and in real time. Modern KYB systems are now designed to meet that exact challenge.

1. Global Registry Access

Accessing reliable ownership information across borders is one of the biggest challenges in KYB. Many jurisdictions, especially offshore regions, limit visibility into corporate structures. This makes it difficult for compliance teams to verify entities and understand who truly controls a business.

The KYB pulls real-time data from official company registries in 250+ jurisdictions, including offshore regions that are typically very difficult to access. This helps add legally sourced detail to group structures and uncover hidden layers of ownership.

2. Visual Ownership Structure Graphing

Understanding who really owns a company is not simply obtaining names. It is about seeing how they are connected. When entities are presented in isolation, it becomes almost impossible to trace influence, control, or hidden ownership across layers. This visualisation specifies how to illustrate beneficial ownership structures using diagrams.

Implementation of a robust KYB process implies creation of visual ownership trees that identify relationships at many levels:  

• Direct and indirect ownership
• Voting control 
• Control of the entity through influence from other entities

To clarify an example, you can see at a glance if a company shareholder is in turn owned by a different company, and therefore identify who really benefits. 

3. Control-Based UBO Identification

While the 25% threshold based on share ownership is common in a legal definition of a UBO, it misses a wider definition of control, such as: 

• Board representation  
• Legal proxies 
• Power of attorney agreements

UBOs can be identified even if they hold no official shareholding or are listed as owning 10% based on the actual decision-making authority. If they are the decision-maker, they are the UBO.

4. Ownership Change Monitoring that Never Stops

In a business, a group structure is not static. Mergers, acquisitions, and reorganizations all of these change control overnight. The KYB monitors all changes and issues and alerts accordingly.

• A new entity enters the group
• Ownership percentages shift
• A UBO is replaced or removed

This turns KYB from a one-time task into a living compliance process.

UBO Compliance Requires Full Group Structure Visibility

Contemporary regulatory environments require more than basic company verification. Identifying the true UBO requires unwrapping the layers of legal entities that mask control, and those layers are often across multiple jurisdictions, corporate forms, and control mechanisms.

Organizations that do not take a group structure approach risk non-compliance with AML and KYB regulations, facilitating financial crime, and reputational jeopardy.

The KYB – Purpose-Built for UBO Transparency

Addressing these layered ownership issues requires more than basic checks, and that is exactly what The KYB is designed for. With real-time registry integrations, ownership graphing, control-based UBO identification, and ongoing monitoring, The KYB delivers clarity into group structures and hidden beneficial owners like no other product.

• Discover beneficial owners hidden deep within a complex ownership structure.
• Visualize entire group structures across borders.
• Instinctively monitor and respond to every change in control.
• Confidently meet global regulatory requirements.

Discover how The KYB is an all-in-one solution to complete business verification, empowering you to ensure group structure transparency within the ownership framework. Book a demo with The KYB today.