Understanding Ultimate Beneficial Ownership (UBO) is essential for financial transparency and regulatory compliance. UBO verification has become a key aspect of due diligence for businesses around the world. It's because companies need to know who they’re doing business with and if these customers are worth the trust. How to identify and verify UBOs? What's the proof of UBO identity? What are the common misconceptions? Let’s explore the topic of UBO verification.
At its core, UBO verification is the process of confirming and validating the identity of business owners. These are the individuals holding significant ownership or control over a company. This verification is fundamental to ensuring transparency in financial transactions. It plays a key role in preventing illicit activities and adhering to regulatory requirements. Some of the components of UBO verification include reviewing legal documents and understanding the ownership structure. Yet the key is verifying individuals identified as owners or holding control over the business.
UBO identification is the process of pinpointing the persons who ultimately own or control a company. They might have significant influence over its operations, decision-making, or financial activities.
Key elements of UBO identification:
To find out who can be identified as a UBO, let’s take a look at the differences between a UBO and a beneficial owner. These two terms are often used interchangeably, even though they refer to different types of ownership. The UBO, or ultimate beneficial owner, is always a person who holds significant control over the business. They gain the most from the company's operations. A beneficial owner is someone who owns part of an asset. Contrary to common misconceptions, a beneficial owner isn’t always an individual or a shareholder.
While individuals with significant ownership stakes are often UBOs, businesses can qualify as beneficial owners. Entities like trusts, foundations, or corporations can be beneficial owners if they exercise substantial control or ownership. We commonly see that those with 25% of ownership rights are considered UBOs. However, this differs based on region.
UBO verification is key to preventing money laundering and other illicit activities. Several steps are typically involved in this process:
Proof of UBO identity is the documentation that states the individual is identified beneficial owner of a company. This proof is essential for regulatory compliance and building trust among stakeholders. It may take the form of:
Dotfile provides an end-to-end business verification solution for compliance teams. It allows for discovering the ownership structure, identifying and verifying UBOs. You can easily pinpoint non-individual beneficial owners and the important people behind these entities. Automating the identification and verification processes speeds up the onboarding journey. Dotfile offers a whole suite of services thanks to which businesses can automate KYB and UBO verification. KYB checks, document and video verification, AML monitoring, risk assessment, and more, can be done within minutes.
Understanding UBO structure, and verifying individuals and non-individuals holding control over an entity is not only a regulatory requirement, it is a necessity that helps minimize the risk of fraud and reputational damage. Dotfile helps to verify businesses and the people behind them to ensure you only enter a business relationship with a company you can trust. Book a demo to see how we can help you.