What is UBO Verification and How to Conduct it Effectively?

Nowadays, due to the advancement in technology and the availability of sophisticated tools, there are many individuals who disguise their identity and commit criminal activities such as money laundering, financial crimes, etc. UBO verification verifies the true owners of the business and identifies the potential risks and frauds involved in it. This UBO verification is an essential part of AML compliance, prevents financial crime, and fulfill compliance. In this article, take a look at the significance of UBO verification and what exactly the term UBO is.

What is UBO?

UBO (Ultimate Beneficial Owners) are the actual persons who own and control the company. These are the persons on whose behalf a transaction is being conducted according to the Financial Action Task Force (FATF).

The UBO criteria are defined as 25% above the share of the company and having voting rights, including the guardian of a minor. They control the company and have the right to make the organization’s decisions at the end of the day.

Why is UBO Verification Important?

UBO verification identifies the real owners of the associate company in order to detect the potential risks and frauds involved with them. Due to unprecedented growth in crime and theft, it is important for all companies to identify their ultimate beneficial owners, their suppliers, and other third parties. 

The real danger is that when you have all the legally beneficial owners in the organization, but your associate business partner is involved with high-risk beneficial owners.

That’s why UBO verification is so important in order to detect the potential risks and other frauds involved within the organization. A good reputation is a worthy asset for a company, cooperating with a negatively reputed company will dangers the overall honor of the business.

What are the Benefits of UBO Verification?

UBO Verification is the most underrated step while doing KYB onboarding. UBO beneficial owner verification has the maximum risk and fraud involved, which is mostly neglected by many sectors. The verification provides many benefits to the organization including secure business operations and enhanced decision making ability. Nonetheless, the most important benefits are the following:

• UBO verification detects the potential fraud and risks that make organizations easy to understand the partnered company deeply and legally.
• This verification allows companies to make more informed decisions about whether they should form a new relationship with the organization or not.
• With due diligence and deep audit reporting of the business, companies can report to law, and this will be beneficial in order to fight against money laundering, corruption, and other financial crimes.
• This will enhance the transparency between the companies and improve corporate governance on the part of investors and consumers. 

How to Conduct UBO Verification Effectively?

There are some ways of conducting a successful UBO verification, consider all these essential steps:

Collect Documents

The first request from the cooperate business is to demand the necessary and official documents related to an organization such as business foundation documents, registrations, shareholders, licenses, or other legal documents. All these documents should be up-to-date.  

Analyze Ownership Structure

Detect the overall organization’s structure and match it with the provided documents. Review the details of shareholders and other entities involved in it. This will help in detecting whether the documents provided match with their existing company.

Verify UBOs

Validate the UBO ultimate beneficial owner details and cross-check the information with reliable and trusted sources such as government or private databases. This is the point to check the beneficial owners and their identity. This involves their previous background history to detect any criminal activity.

Source of Income

Verify the UBO’s individual’s financial history whether they earn white money or black money. Check the (Politically Exposed Person) PEP lists. These lists contain information on the organizations that are involved in any corruption or bribery.

Continuous Monitoring

Continuous monitoring is the most essential step in order to make UBO verification effective. Examine the verification on a daily basis as there are high chances that a customer profile changes over time. For example, a beneficial owner involved in the PEP list and simply make changes to their private information.

Conclusion

Wrapping up, the Ultimate beneficial owners are the true persons who control the company and have the right to make decisions in the organization’s financial transactions. UBO verification is an essential process to fight against fraud and other financial crimes. This verification prevents the business from corruption, money laundering, and other fraudulent activities that can be generated after associating it with other organizations. UBO verification process conduction can be more efficient if organizations stick to carefully following each phase and monitor everything while conducting. UBO verification is the best approach to identifying the potential risks and fraudulent activities associated with the owners of the organization.