The most common practice for verifying a business is to confirm its Ultimate Beneficial Owners (UBOs). These owners provide in-depth information about the industry and help check its legitimacy. Simply put, a UBO is a person who owns 10-25% of the company’s interest. They also significantly impact the company’s operation decisions. The Financial Action Task Force (FATF) designed beneficial ownership regulations to verify these international watchdog authorities. These assist companies in verifying the business owners and uncovering the complex ownership structure.
This article will provide in-depth information about verifying the company owners from worldwide and centralized reports for record storage.
What is a Beneficial Ownership Regulations?
The regulatory bodies that are responsible for fighting against money laundering and terrorist financing created various rigid regulations, including AML/CFT, KYC and KYB. These obligations were designed to assist companies in verifying partner businesses. The partner organizations can be financial, banks, or insurance entities. However, UBO regulations are not the same in every sector or country. Various laws are based on industry and regional policies. For example, in the UAE, free zones have different UBO rules related to the rest of the country’s laws. In the same way, there are tax havens in Sweden and Switzerland where nominal UBO verification checks are required to onboard any business.
Top 2 Techniques Use to Comply with Beneficial Ownership Regulations
UBO laws constantly evolve with time and areas. Complying with these is a challenging task for companies. However, businesses can not overlook this procedure because it can result in hefty penalties from regulatory bodies. Furthermore, any tragedy damages the company’s reputation and the trust of the customers. There are two techniques which followed by the companies for Ultimate Beneficial Owner verification:
Traditional UBO Identification
In traditional techniques, the company uses a manual process to identify the ultimate owners of the partner business. The business owners have to submit the papers by visiting the office, which takes time and is expensive. Furthermore, in the manual process, human representatives verify the documents. It gives significant false positives, which reduce the accuracy rate of the results. Directly, a traditional technique is not only a slow process but also full of errors.
Automation UBO Identification
Automation is the company’s latest technique to comply with UBO identification by relying on the online business verification service. This aids them in collecting information remotely and provides real-time results with risk assessment reports. Automation software uses machine learning and robust AI technology to reap accurate results. Moreover, this also adds the customizable form during onboarding, which helps them gather only essential documents. To save the customer time and cost on piling the unrelieved papers.
Best Practices to Comply with UBO Rules
The company can onboard the company with accurate results by upholding the given steps:
Collect the documents
Use the automation tool to customize the business data collection process. They can only add the required documents to streamline the process and reduce customer stress. With the help of this company, gather all the needed information remotely from anywhere, anytime. It also reduces the time it takes for the company to pile up all the documents and then sort them according to their nature. It will be done automatically in the software.
Verify the documents
After collecting, the company must ensure the legitimacy of the documents by checking the security features. These features depend on the nature of the papers. You can check the borders, signatures, and fonts of the documents to ensure they are not counterfeit. The company must also cross-check the documents from government records to verify the written information. Optical Character Recognition (OCR) technology can convert written data into computer-readable text. This will assist them in meeting these against the government sanctions to ensure the company exists in the real world, not only on paper.
Screen the Profile
To comply with beneficial ownership regulations, companies must screen their company profiles against watchlist sanctions. These sanctions lists are designed and managed by international watchdogs such as FATF, OFAC, SEC, or FCA. All of these are regulatory bodies, and it’s their duty to combat money laundering and terrorist financing. For that, they have to meet the company’s data in parallel and ensure the information about their UBOs does not match the information stored in these sanctions lists.
Ending Note
Keep in mind that beneficial ownership regulations change over time. The UBO rules depend on the country and industry policies. However, business verification service providers monitor the latest rules according to the company and country so that organizations can meet the global UBO verification regulations and avoid non-compliance penalties.
Read more: Corporate Screening Services: Ensuring A Protected Business World
