As technology grows, the companies have various clients to onboard. Most scammers want to use their service to launder money or terrorist funding. To combat financial crimes, international watchdog authorities designed regulations that assist companies to identify the business before onboarding. In these obligations, the highlighted point is identifying a beneficial owner. This protects them from financial crimes and streamlines the onboarding process.
However, it is challenging for businesses to comply with Ultimate Beneficial Owners (UBOs) identification derivatives. Continue reading to learn how to adhere to Know-Your-Business checks.
Identification of Beneficial Owner – Overview
There are different types of company ownership structures, simple and complex. The simple one is where the business owner controls the operation and is transparent. It is convenient for the other company to partner with this business which has no curtain in their operation and actual funding source. On the other hand, some businesses have complex ownership structures. They have different UBOs and shareholders who control the decisions on behalf of the owners. However, they are not funding sources such as the CEO, CFO, or manager.
In the complex ownership structure, all the UBOs own 10-25% of the company’s interest. Now, before onboarding, companies must verify the identification of all these beneficial owners. This ensures the entity is real and its owners are not involved in illicit activities. Additionally, the KYB checks guarantee that they are complying with the regulations. The confirmation should be valid or adequate to prevent money laundering and terrorist financing.
Efficient Steps for UBO Identification
There are various rigid steps that a company must have to take before onboarding a business. Adequate measurement during business verification enhances trust and creates a secure environment. Following are the steps that a company should never overlook before onboarding:
Creating a Profile
For efficient and accurate results, creating a profile is essential. This can be done by gathering the required data about the business. This information depends on the company policies and country regulations. The nature of the business they are establishing a relation is also characteristic that changes the required documents. Mainly, in most of the cause company need the permanent addresses of the owners, contact info, financial statements, account numbers, transaction history, or government IDs.
Verifying the Profile
After creating the profile, verify the data submitted by the company to ensure the owners are real and not only exist on the papers. It is done by attesting the document by its security features to confirm the record is original, not counterfeit. The security features are the signatures, fonts, and borders, depending on the nature of the documents. Data validation is also an essential step for verifying the documents. It ensures the written information of the papers is not manipulated or changed according to need. For that, the company must cross-check the data against the government databases to ensure the data matches the original stored documents.
Screening the profile
Once the identity of the owners is verified, the next step is to ensure they are not involved in illicit activities, which is done by screening the profile. In this process, the company must cross-check the profile against the watchlist sanctions such as AML, CTF, SIEs, PEPs, etc. These databases can be government or third-party. This ensures the data is not in any blocklist and the ultimate beneficial owner is legitimate to onboard. By screening, companies can prevent money launderers or terrorist funders in the initial phase of the business partnering.
Centralized Profile
The company needs to check the partner’s business profile every month. It ensures the owners are the same and that no changes happen in the company’s financial structure. The transparency of the corporate structure secures the environment and enhances the trust between the B2B. The centralized report is also a quick and easy technique to show law enforcement agencies that the company is upholding all the regulations.
Automate the Process
Following the adequate steps for the identification of beneficial ownership manually is challenging; it consumes time and cost. Furthermore, human resources do not provide accurate results. This all creates a negative impact on the partner business, which directly loss the company revenue. In corporate communications, a smooth onboarding process and secure transactions create a trust that can not be upheld by the manual method.
The advanced technology provides the automated KYB compliance process for UBO identification, which uses machine learning and robust AI techniques. This reduces the time and cost by eliminating the human resource load on the company. It directly creates a positive impact on the partner company. This also ensures compliance with the latest national and international regulations to avoid non-compliance penalties.
