How to Collect & Verify Beneficial Owner’s Information for Compliance

Companies must verify the partner’s business and its owners to comply with worldwide regulations such as Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT). To do so, they have to collect beneficial owners’ information and verify this through screening against government and third-party databases. Verification of the entity indicates that they are onboarding legitimate businesses and meeting rigid regulations. 

Unfortunately, it is not as simple as it looks. Many bogus companies use complex ownership structures to launder money, and that’s why 2- 5% of the global GDP is laundered. They registered the company in a complex ownership structure to hide their ultimate beneficial owners, such as LLCs, which makes it challenging to find the actual owners. Beyond small businesses, giant corporations have a more complex ownership structure, from national to international companies. You have to verify all owners and uncover the disguised identity. 

Why is Beneficial Owners’ Information Significant? 

Transparency before onboarding the company is compulsory for businesses to prevent financial scams and secure the dignity of the global economy. From 2024, the US Department of Financial Crimes Enforcement (FinCEN) will make it compulsory for small businesses to report beneficial ownership information (BOI). After that, other countries are also designing new regulations to comply with BOI reporting. Non-compliance caused companies to be fined deftly and subjected to civil penalties. 

Some companies expand the UBO structure to hire the person and owners in line with the other jobs, for example, CTO, CFO, or CEO. This assists them to hide their identity while working in the company. So these loopholes or scammer techniques make it compulsory for companies to authenticate the beneficial ownership information. 

What is the BOI Reporting Rule?

Beneficial ownership is individually owning the company or the actual funding source. Companies can be Ultimate Beneficial Owners (UBOs) of the business who have 10-25% shares. They control the business decisions and have the right to vote.  The AML ordinance defines a beneficial owner as a person who: 

• Owns 10-25% of the company shares (Depending on the location)
• Has the right to make decisions and vote against the business strategies 
• Has significant control over the business  

Now finding the information about all these persons and verifying known as beneficial owners information reporting. Always remember to find the actual owner and attest their documents. The managers, CEO, or UBO are not actual funders of the company. 

How to Collect Beneficial Owner’s Information? 

The business owner’s information should be available in the company if established by one person, family, or different parties. The transparent corporate structure defines all the entities that own the business by address, contact, name, or role. Nevertheless, most companies work on the LLC structure, where owners hide behind the curtain. 

Ways to Collect the business owners’ data

Manual 

Companies mainly working with other businesses (B2B) can ask their partner representatives to submit their owner’s information. In this data, they must collect government IDs, financial statements, addresses, contacts, etc, depending on the country or sector policies. 

Automate 

Using technology to remote document collection, you can design the form for the customer according to regulations and sector policies. This assists them in only reaping information from the business, which is essential, and doesn’t waste time on irrelevant papers.

How to Verify Beneficial Owners Information? 

For beneficial ownership information reporting, there are various checks from which you have to verify the collected data. These derivatives are compulsory to ensure the submitted information is legal and not counterfeit. Below are KYB checks you can follow to verify the beneficial owner’s information: 

Create a Profile 

After collecting the information, you have to store company data in a secured database to create a profile according to their information. It assists you in verifying the information of their ultimate owners. For profile creation, gather the addresses, names, government IDs, registration licenses, etc. 

Attest the Profile 

Information attestation is essential for the company to comply with the KYB measures. It can be done by checking the security features of the documents. These security features can vary according to the papers. Fonts, signatures, and borders are the main security features for document verification. 

Valid the profile 

The information collected from the business owners must be valid. For that, the company should cross-check the written document of the papers, which is done by cross-checking data from the original papers. It ensures the data is valid and not counterfeited to use for bad practice. 

Screen the Profile 

Various databases indicate whether the company was involved in illicit activities or not. These databases can be government or third-party. The onboarding company screens the business ownership information against these databases to ensure their information does not match any of these. PEPs, AML, CFT, and SIEs are the primary databases used in this process.  

Centralized a profile 

Companies must monitor their partner ownership structure after verification to comply with KYB regulations. Perpetual KYB monitoring can indicate any changes in the ownership structure and reveal suspicious trades that occurred by the company or its UBOs. 

Industries of Beneficial Ownership Reporting Requirements

All companies under the AML/CFT regulations must report beneficial ownership information. Although each type of industry has different rules and policies to verify the business to avoid non-compliance penalties, they have to uphold requirements. However, according to FinCEN, companies with LLC sectors or UBOs must report their beneficial owners. Below are some primary sectors: 

• Financial Institutes 
• Medical Insurance 
• Crypto Wallets 
• Real Estate 
• Asset Protection
• Banks  

Additionally, the individual business owner has to report beneficial owners’ information as a small business. The beneficial owners’ report should include their name, address, and nationality. The report should also describe the nature and extent of the owner’s interest in the business.

Related: BOI Reporting: Mitigating Non-Compliance Challenges in Corporate World

Automate Beneficial Owner’s Information 

The adequate technique to verify the business with enhanced due diligence and visualized reports of beneficial owners is The KYB. With the 250+ primary databases, we provide accurate and authentic results. Moreover, meet global compliance to avoid penalties and expand your business. The KYB also ensures the screening by quickly cross-checking the data from PEPs, sanctions lists, legal filings, adverse media as well AML/CFT databases to ensure the company and its owners are not involved in illicit activities. 

The KYB stored results in the centralized reports, which business owners can use to monitor ownership structure changes. Additionally, instant and accurate verification through the KYB saves time and money for the company. For a detailed overview, Talk to The KYB Expert!