No Result
View All Result
SUBSCRIBE | NO FEES, NO PAYWALLS
MANAGE MY SUBSCRIPTION
NEWSLETTER
Corporate Compliance Insights
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe
No Result
View All Result
Corporate Compliance Insights
Home Compliance

Identifying and Verifying Ultimate Beneficial Owners

by Paul Charmatz
April 19, 2018
in Compliance, Featured
beneficial ownership

Getting the Full Picture, Fast

Comprehensively identifying and verifying corporate hierarchies and ultimate beneficial owners (UBOs) has become increasingly important since the implementation of 4MLD and MLR2017. However, achieving this view is time-consuming, and most organisations struggle to uncover the full picture. In this article, Paul Charmatz, Managing Director at encompass corporation, explores some of the big questions around beneficial ownership.

The increasing burden of identifying and verifying ultimate beneficial owners (UBO) is a common thread in the conversations we have with regulated firms. Gathering and analysing the information needed to understand corporate ownership structure and discover UBOs takes anything from several hours to days. As a highly manual process, it’s also prone to human error, leaving firms exposed to unknown risks and criminal activity such as money laundering, corruption and bribery.

What Are Ultimate Beneficial Owners?

An ultimate beneficial owner is an individual who owns or controls more than 25 percent of the shares or voting rights in a legal entity, holds the right to appoint or remove the majority of the board of directors or has the right to exercise significant influence or control over the company. Under the Fourth Money Laundering Directive (4MLD), senior managing officials can also be treated as beneficial owners where the above criteria cannot be determined.

Global regulations – such as the Money Laundering Regulations 2017 (MLR2017) in the U.K. and the upcoming FinCEN final rule on Customer Due Diligence (CDD) Requirements for Financial Institutions in the U.S. – dictate that these individuals must be identified and reasonable measures taken to verify their identities.

Why is it so Important?

Criminals have long used complex corporate structures to hide their real identities and conceal where their funds have come from – or what they are being used for. In recent years, the fight against money laundering has stepped up, with stricter regulations (such as 4MLD and MLR2017) put in place around financial transparency.

Regulated firms have to carry out exhaustive checks when onboarding new customers to ascertain whether they present a compliance risk to anti-money laundering (AML) and anti-bribery and corruption (ABC) regulations. The inability to identify the UBO of a company could lead to an unintended breach of these rules, resulting in heavy fines and severe reputational damage, so it’s a crucial issue that firms have to have a real grip on.

Why is it so Difficult?

Unfortunately, ownership won’t necessarily be neat, within a single jurisdiction or entity type, and it could be many layers deep depending on the structure of the customer. In addition, different countries have different levels of transparency and disclosure requirements regarding company registrations. As a result, we’ve seen many firms struggle with the discovery of UBOs due to the difficulties of mapping out the full picture of an organisation’s ownership structure.

The sheer number of sources needed to comprehensively understand ownership structure, identify UBOs and screen all relevant individuals and entities for regulatory and reputational risk presents a tremendous challenge. Data sources range from publicly available sources (e.g., many corporate registries) to premium providers of company data, regulatory data and adverse media, so companies have to access multiple websites and subscribe to multiple vendors, as well as find a way to integrate these into existing KYC or onboarding platforms.

The challenge doesn’t end once the initial identification and verification is complete; you then have to keep up the ongoing monitoring of your identified UBOs, and, as regulations are updated, your processes have to be refined in order to ensure ongoing compliance.

Where Do I Find the Information?

Data aggregators are typically used to extract UBO data from public sources to create full company hierarchy structures or to hold traceability references back to the original source. This data is relied upon as a “secondary source,” which still requires confirmation with a “primary source” (an approved registry or regulatory source, such as Companies House, Infogreffe or the U.S. Securities & Exchange Commission) or with the client – which is a very manually intensive process.

Federating the search using robotic process automation, such as that built within the encompass platform, can play a key role here, driving the retrieval of relevant information from trusted sources and the analysis of that data, in line with a firm’s KYC policies, in real time. This saves companies significant time and cost while at the same time eradicating the potential risks of human error.

How Can I Balance Customer Experience with Regulatory Compliance?

There are a couple of key developments underway in the industry that are leading the way for a more automated, and therefore faster, process.

  • Digitalisation: The development of algorithms to iterate through an ownership structure between data available from aggregators and to, in turn, confirm this against a primary
  • Beneficial Ownership Registers: 4MLD requires that all EU member states develop and maintain public beneficial ownership registers, and 20 countries across the EU are also part of the Extractive Industries Transparency Initiative (EITI). The aim is to increase transparency over who owns and controls companies, help inform investors when they are considering investing in a company and support law enforcement in money-laundering investigations. The U.K. was the first country to create a Central Public Registry, launching the “People with Significant Control” (PSC) register in 2017 – a publicly available database of U.K. limited companies that are now expected to maintain details of their UBOs and supply this information to Companies

The challenges around identifying and verifying UBOs may be substantial, but the risks that come with noncompliance are even greater. encompass automates information and news discovery from the widest range of free and premium sources globally, in line with your firm’s policies, to enhance the way you perform KYC at onboarding, as well as event-driven refresh and remediation. By integrating encompass with your existing KYC and onboarding solutions, you can significantly reduce the time, cost and risk involved in customer due diligence activities while also enhancing the customer experience and demonstrating robust compliance to regulators.


Tags: AMLAnti-BriberyAnti-CorruptionAutomationBeneficial OwnershipDue DiligenceFinancial Crimes Enforcement Network (FinCEN)Know Your Customer (KYC)
Previous Post

TRACE: Cost-Effective Internal Investigations

Next Post

Financial Industry Views Regulation as Positive, But Insufficient to Prevent the Next Crash

Paul Charmatz

Paul Charmatz

Paul Charmatz is Managing Director Global Sales at encompass, which he joined in May 2017. He has considerable experience in the business information space, particularly with global banks and financial institutions. This includes roles at Dun & Bradstreet, where he ran the European sales organisation covering 13 countries and was MD of their Benelux business. More recently he was CEO of RM, a compliance data supplier, and SVP for Europe and AsiaPac for Onesource and Head of FS globally. Paul has worked with a number of private equity companies who invested in the businesses he managed, including Union Square, OTPP and GTCR.

Related Posts

Phaxis 100 dollars

AML & KYC: Addressing Key Challenges for 2023 and Beyond

by Alex Roberto
March 16, 2023

(Sponsored) In today’s world, financial criminals are often a step ahead of regulators and financial institutions who struggle to effectively...

Paul Weiss Economic Sanctions and AML Developments 2022_f

Economic Sanctions and AML Developments

by Corporate Compliance Insights
March 15, 2023

Sanctions start high and stay high 2022 Year in Review Economic Sanctions and AML Developments What’s in this report from...

credit score gauge

Sales at All Costs? Unified Credit Risk Management Can Squash Bad Deals Before They Happen

by Matthew Debbage
March 15, 2023

The collapse of a business doesn’t usually happen all at once. There are warning signs. Late payments, legal filings and...

money laundering concept

It Takes a Village: Preventing FinCrime Means Everybody Needs Skin in the Game

by Samar Pratt
March 15, 2023

Banks bear the brunt of consequences for financial crimes amid a huge increase in anti-money laundering fines in 2022, making...

Next Post
Financial Industry Views Regulation as Positive, But Insufficient to Prevent the Next Crash

Financial Industry Views Regulation as Positive, But Insufficient to Prevent the Next Crash

Compliance Job Interview Q&A

Jump to a Topic

AML Anti-Bribery Anti-Corruption Artificial Intelligence (AI) Automation Banking Board of Directors Board Risk Oversight Business Continuity Planning California Consumer Privacy Act (CCPA) Code of Conduct Communications Management Corporate Culture COVID-19 Cryptocurrency Culture of Ethics Cybercrime Cyber Risk Data Analytics Data Breach Data Governance DOJ Download Due Diligence Enterprise Risk Management (ERM) ESG FCPA Enforcement Actions Financial Crime Financial Crimes Enforcement Network (FinCEN) GDPR HIPAA Know Your Customer (KYC) Machine Learning Monitoring RegTech Reputation Risk Risk Assessment SEC Social Media Risk Supply Chain Technology Third Party Risk Management Tone at the Top Training Whistleblowing
No Result
View All Result

Privacy Policy

Founded in 2010, CCI is the web’s premier global independent news source for compliance, ethics, risk and information security. 

Got a news tip? Get in touch. Want a weekly round-up in your inbox? Sign up for free. No subscription fees, no paywalls. 

Follow Us

Browse Topics:

  • CCI Press
  • Compliance
  • Compliance Podcasts
  • Cybersecurity
  • Data Privacy
  • eBooks Published by CCI
  • Ethics
  • FCPA
  • Featured
  • Financial Services
  • Fraud
  • Governance
  • GRC Vendor News
  • HR Compliance
  • Internal Audit
  • Leadership and Career
  • On Demand Webinars
  • Opinion
  • Resource Library
  • Risk
  • Uncategorized
  • Videos
  • Webinars
  • Well-Being
  • Whitepapers

© 2022 Corporate Compliance Insights

No Result
View All Result
  • Home
  • About
    • About CCI
    • Writing for CCI
    • NEW: CCI Press – Book Publishing
    • Advertise With Us
  • Explore Topics
    • See All Articles
    • Compliance
    • Ethics
    • Risk
    • FCPA
    • Governance
    • Fraud
    • Internal Audit
    • HR Compliance
    • Cybersecurity
    • Data Privacy
    • Financial Services
    • Well-Being at Work
    • Leadership and Career
    • Opinion
  • Vendor News
  • Career Connection
  • Events
    • Calendar
    • Submit an Event
  • Library
    • Whitepapers & Reports
    • eBooks
    • CCI Press & Compliance Bookshelf
  • Podcasts
  • Videos
  • Subscribe

© 2022 Corporate Compliance Insights

Welcome to CCI. This site uses cookies. Please click OK to accept. Privacy Policy
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT