Verifying the ultimate beneficial owners (UBOs) is essential for financial institutes. This not only proves the identity of the company owners but also creates a transparent corporate structure. According to that, financial institutes can determine the risk associated with the business. Various UBO checks are compulsory for the financial industry, including fintech, to comply. These checks assist companies in combating financial crimes such as money laundering and terrorist financing. International and national law enforcement agencies expect financial institutes to comply with strict regulations. Any institution that falls within the scope of anti-money laundering and counter-terrorist financing (AML/CFT) must comply with the UBO checks requirements.
What is UBO Verification?
Before onboarding the business, financial institutes and other industries must comply with AML/CFT regulations. These rigid obligations demand verification of the beneficial owners of the companies, which can not be possible without UBO verification. In simple words, UBO checks are the measures that assist financial institutes in compliance with various rigid regulations
What is UBO? The definition of the ultimate beneficial owner is a person who owns 10-25% of the company shares. Moreover, the UBOs have direct control over the voting and decision-making. During the UBO verification, financial organizations gather significant information about the company. Further, verify this information to ensure the real owner is not involved in illicit activities.
Impact of UBO Checks on Financial Institutes
Adequate business verification through UBO measurements creates significant positive impacts. These are key points for the financial institutes in combating financial crimes. Additionally, safeguards the financial company from law enforcement’s hefty fines and sanctions. Below are the more prominent advantages of UBO checks:
Mitigating Risk
The UBO verification mitigates the risk associated with the company. It ensures the company’s level by determining its standards. After that, financial institutes can take steps according to the level of risk. This also assists the companies in working on the level of risk they are facing. Internationally, there are high-low, low-risk, medium, and high-risk levels, depending on the business and the owners in which industry they work.
Enhance Security
Security is the most essential need of financial institutes to create a secure environment. This enhances brand loyalty and security simultaneously. The financial institutes can ensure they are onboarding legal companies not involved in illicit activities. Through the in-depth UBO verification, they additionally guaranteed the companies their owner is verified. Verifying the hidden owners of the company ensures they can beat the bad actors and combat significant financial crimes such as money laundering.
Streamline Compliance
The most complicated procedure during the UBO verification is Compliance with the various rigid regulations of the national and international agencies. These can be diverse depending on the nature of the business and the company’s profile. Moreover, the regulation constantly changes depending on the economic, social, and governance (ESG) and the industry policies. Online KYB verification streamlines this complexity through diverse cross-border regulation technology. Through due diligence, the UBO finance institutes follow the national obligations according to government demand.
Prevent Fraud
Verification of the ultimate beneficial owners of the company ensures stability and that the company is not involved in fraud. They can guarantee that they are legal persons with no record of previous adverse media or illicit activities. This protects them from various scams and through enhanced verification measures. Starting business relations with UBO verification guarantees they will not implement fraud in the future. This also provides the financial organization’s peace of mind that they are working with legitimate companies and compliance with industrial obligations from authorities.
Increase Customer Confidence
Customer loyalty is also boosted when the financial institutes verify the company’s ultimate owners and unveil the complex structure. This shows the institutes’ dedication to their policies, and laws to secure the integrity of the global economy. The increase in customer loyalty leads the company toward profit and ensures they protect their reputation by ensuring they have no links with scammers.
Best Practices to Verify the UBOs
There are various steps to verify the ultimate owners according to the companies and government policies, but below are the perfect techniques that are part of diverse verification steps:
- Gather the required information from the company and ensure you collect all the essential papers needed to verify the location, address, or license. Financial institutes can use business collection forms from online KYB verification service providers.
- After making the profile of the companies, collect the shareholder’s information, including the financial statements, to verify their background. The information about the ultimate owners indicates the real name or previous source of funding.
- For due diligence and compliance with the strict regulations, screen the confidential information of the ultimate owners with international watchdog databases. it ensures they are not involved in illicit activities such as PEPs, KYB, or adverse media databases.
- Do not forget the ongoing monitoring after the verification so that a financial institution can supervise real-time transactions and report suspicious withdrawals or deposits.
Conclusion:
The transition from conventional to digital UBO checks signifies a momentous leap in enhancing the security posture of financial institutions. By harnessing the potency of automation and avant-garde technologies, these institutions can streamline operations, elevate precision, and remain abreast of regulatory imperatives. In the evolving landscape of financial realms, the adoption of digital UBO checks is not merely a technological advancement but a strategic necessity for upholding the integrity and security of the global financial ecosystem.
