3 AML Experts Answer How to Verify Ultimate Beneficial Owner (UBO) Amidst Its Challenges

Imagine a world where financial transactions flow freely, but the identities of those controlling the companies remain secret. In today’s interconnected world, where financial transactions crisscross the globe at lightning speed, ensuring transparency about who controls companies is more crucial than ever. But who are these ultimate masters, the elusive figures pulling the strings behind the scenes? We’re talking about Ultimate Beneficial Owners (UBOs), and identifying them can be a frustrating maze for compliance teams. Inconsistent data, varying regulations across the globe, and internal process gaps can all turn a routine KYB check into a compliance nightmare.

The KYB assembled a team of industry experts to shed light on challenges associated with UBO verification and illustrate a way forward. Buckle up as we dive deep into UBO identification, corporate data risk, and sanction compliance. This in-depth article gives practical insights and actionable strategies from a thought-provoking session between Michael Harris, Financial Crime Risk Solutions Consultant at Neotas FCC Consulting with a proven track record of tackling financial crime, Mark Bain, The CEO of The KYB, who brings unparalleled expertise, and Louie Vargas, Founder and Co-Chair of ACFCS Nordics Chapter with over a decade of experience in financial crime landscape. Read this piece to conquer UBO challenges and safeguard your organization from financial crime risks!

Is UBO Screening A Challenge?

UBO screening and compliance are challenging milestones in achieving regulatory compliance. The problem lies in accurately identifying the ultimate beneficial owner, which can pose significant difficulties as we navigate global markets and encounter various sanction lists. Keep reading to discover more about the challenges presently existing in the domain of the business verification industry.

How Do Inconsistent Data Points across Jurisdictions Impact the KYB Compliance Efforts?

The issue lies in the need for a unified definition to establish a clear understanding of the requirements for both your organization and the jurisdictions where a business operates. These fundamental elements should be addressed at the outset. It may come as no surprise that different parts of the company may utilize the same KYB tool in varying ways. Therefore, it is essential to establish a level playing field to ensure comprehension of all gathered information and the utilization of the correct data fields.

This clarity in compliance makes work much easier, as we now know precisely what to focus on. When discussing different jurisdictions, the issue appears more prominent in the EU than in the US. In the US, a single law applies nationwide, whereas in the EU, there are multiple member states with differing understandings and interpretations of the law. This presents a challenge.

3 AML Experts Micheal Harris

Primary Challenges Associated with UBO Compliance:

During the extensive discussion in the webinar session, experts identified the following challenges many businesses face to ensure corporate transparency. Read out to determine the most prominent problems your company might face during the identification and screening of Ultimate Beneficial Owners:

  • Data Availability and Quality:

Most businesses and compliance professionals face significant challenges in accessing reliable and comprehensive data on Ultimate Beneficial Owners. The quality, completeness, and governance of available data in live registries are often insufficient for regulatory obligations.

  • KYB (Know Your Business) Obligations:

Institutions must gather extensive information to understand who they are doing business with. This is a fundamental part of AML (Anti-Money Laundering) regulations but is complex due to the sheer volume of data required, especially when onboarding businesses.

  • Complexity of Onboarding Businesses:

Onboarding a business involves collecting and verifying a substantial amount of information and documentation. This process is more intricate compared to onboarding individuals and requires a deeper understanding of the business operations and associated risks.

  • Risk Assessment:

Part of the compliance process involves assessing the risk of money laundering or terrorist financing associated with a business. This requires building a detailed picture of the business activities and determining the appropriate level of due diligence.

  • UBO Identification:

Identifying beneficial owners and the ultimate beneficial owner is a complex task. The difficulty is compounded by external factors such as incomplete data and varying standards of data governance across different jurisdictions.

  • Variability and Reliability of Public Registers:

 Although there have been efforts to improve public registers, they remain inconsistent globally. Some registers may not be complete or reliable, making it difficult for compliance professionals to depend on them for accurate Ultimate Beneficial Owner information.

  • Lack of Uniformity Across Jurisdictions:

Different jurisdictions have varying interpretations and implementations of AML regulations, leading to a lack of uniformity. This variability adds to the complexity of compliance, especially in regions like the EU, where multiple member states have different rules.

3 AML Experts - Louie Vargas

Way Forward to UBO Compliance:

In light of the aforementioned challenges, the prevailing question is, “How can we guarantee compliance with UBO regulations and overcome these obstacles? Is there a path forward?” The resounding answer is yes! But how, you ask? Our experts have meticulously assessed the following solutions:

  • Utilizing Data Providers:

Leveraging data providers to source necessary information is critical. These providers can offer access to comprehensive datasets that help identify UBOs. 

  • Human Resources for Data Analysis:

Even with advanced data sources, human intervention is necessary to verify and analyze the data. Skilled compliance professionals are needed to sift through the information, verify its accuracy, and extract relevant details. This hybrid of tech and human expertise is crucial for effective compliance.

  • Understanding the Full Supply Chain:

Extending due diligence beyond immediate customers to include their customers and supply chains is important. This broader perspective helps identify risks that might not be apparent when only considering direct customers, ensuring comprehensive compliance.

  • Implementation of a Risk-Based Approach:

Adopting a risk-based approach to compliance is essential. This involves conducting initial risk assessments to determine the level of due diligence required for different customers or third parties. By focusing on the specific risks associated with each entity, resources can be allocated more effectively, enhancing compliance efforts.

  • Balancing Data Quantity and Quality:

It’s crucial to manage the balance between having too much and too little data. Overloading data can lead to analysis paralysis, while insufficient data can result in poor decision-making. The key is to efficiently use technology to filter and highlight the most relevant data for compliance purposes.

  • Focus on Regulatory Compliance and Risk Management:

Ensuring that compliance efforts are not just for satisfying regulators but are also geared towards understanding and mitigating financial crime risks. This dual focus ensures that compliance strategies are robust and effective in addressing the actual risks posed by various entities in the business ecosystem.

The Bottom Line:

Many firms still rely heavily on curated data sets for compliance in today’s complex regulatory landscape. Access to live corporate registry data and solution providers is increasingly essential. That’s where The KYB (Know Your Business) comes at the forefront, bringing this critical data directly to compliance analysts. The KYB enhances the compliance toolkit by providing real-time access to corporate registry information, which is vital for verifying the Ultimate Beneficial Owner and identifying any significant changes in ownership.

With its extensive global business database, The KYB is a powerful solution for firms aiming to enhance their compliance processes. By integrating live corporate registry data, we equip businesses and compliance professionals with the necessary means to stay ahead of evolving regulatory challenges and effectively manage financial crime risks.

Get in touch with experts at The KYB today!

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