In today’s rapidly evolving landscape, financial institutions face increasing pressure to understand who they work with. Regulatory bodies are placing greater emphasis on identifying business relationships to prevent crime, making it both a requirement and an ethical duty for companies. Ultimate Beneficial Ownership (UBO) screening plays a vital role in fulfilling these responsibilities.

UBOs are individuals who are the main owners or beneficiaries of a legal entity. This ownership can sometimes be obscured by layers of bureaucracy or corporate structures. In this post, we will explain UBO screening, why it’s important and how organisations can stay ahead of regulatory requirements.

What is UBO screening?

UBO screening is the process of identifying the individuals who ultimately own or control a company. Many individuals reduce their visibility through legal or illegal means in order to hide their identity and source of funds. Bad actors usually conceal themselves [GM1] using:

1. Complex corporate structures: Companies hide behind these structures to conceal the beneficial owner. They can do this by creating multiple layers of ownership, using nominee directors or shareholders, and leveraging jurisdictions with high degrees of confidentiality.
2. Offshore entities: An offshoring business process to limit information sharing and transparency. Entities may follow this approach to enjoy relaxed regulations. Bad actors can set up a trust or company in a jurisdiction which has lax regulations, and have it be listed as the owner of a company in a stricter jurisdiction.
3. Data accessibility issues: Businesses may limit the accessibility of data to hide criminal activity. By registering in lax jurisdictions, they can ensure that they only have to provide the bare-minimum information. They may also delay the giving of and or falsify information to make their activities seem legitimate

Such activity can lead to crimes, such as fraud, tax evasion and terrorism funding. By identifying UBOs, institutions can block bad actors from entering the financial system, creating a safer world.

Why does UBO screening matter?

UBO screening is critical for corporate transparency. It is a key component of Know Your Customer (KYC) and customer due diligence procedures. It should be a core part of every financial institution’s Anti-Money Laundering (AML) framework.

When conducting UBO screenings, companies are:

• Preventing Financial Crimes: Following initiatives like the Financial Action Task Force (FATF) recommendations contributes to AML and Counter terrorism funding (CTF) efforts.
• Fulfilling Regulatory requirements: Regulators worldwide are tightening rules around Beneficial Ownership. Failure to comply can have consequences.
• Enhancing Risk Management: UBO screening helps institutions create more accurate client profiles. This helps mitigate exposure to high-risk individuals, ensuring adherence to their internal policies. 

Consequences of not screening for UBOs

Regulators are inherently suspicious of opaque corporate structures and the institutions that support them. Failing to screen your clients properly can put your company at risk, leading to regulatory repercussions and a loss of stakeholder trust.

Neglecting UBO screening can also have significant financial consequences. Authorities may penalise firms that fail to follow regulations. These penalties may vary depending on the severity of negligence—ranging from fines to criminal charges.

Best practices of UBO screening

To meet compliance requirements and reduce regulatory risks, companies should take a proactive approach to UBO screening. Best practices include:

1. Use of technology: Streamline the UBO identification and verification process with the use of technology, like electronic verification platforms and AI analytics. 
2. Risk-based approach: Tailor the UBO identification process based on the client’s profile. Use enhanced due diligence measures for high-risk cases. 
3. Regular screening: Regularly screen and update UBO information to detect any discrepancies.  

The future of UBO compliance

As technology develops, so do the tools and regulations shaping financial oversight. Lawmakers and financial institutions now have greater access to resources verifying client identities and preventing financial crimes. Tools such as online UBO registries and real-time ownership sharing have enhanced corporate transparency and regulatory compliance.  Advancements in AI and data analysis also show potential in analysing complex corporate structures and identifying suspicious patterns. These technologies can flag potential risks and discrepancies in real time, which can improve financial security and compliance efforts.

UBO screening has become a frontline defence against financial crime. Organisations need to move proactively to ensure that they go beyond the bare minimum in protecting society. To achieve this, it is important to ensure that you have a data-driven governance strategy to keep your company ahead of risks.  

Bolder Governance Services

At Bolder Group, we offer governance and compliance services tailored to meet your unique requirements. Our dedicated team of professionals is well-equipped to assist you with a range of UBO screening services. We work with clients across various industries to accurately identify and verify UBOs, ensuring that your organisation remains compliant with global ownership transparency standards. 

Partner with Bolder to streamline your UBO screening. Contact us today for expert support in navigating regulatory complexities.