New: Beyond Biometrics: The power of database ID Verification in the compliance landscape --> Watch the full webinar
New: Politically Exposed Persons (PEPs): Risks, Compliance Challenges and Best Practices for Effective Screening--> Read the full whitepaper
We're a multiple award-winning firm and one of the fastest-growing tech companies in the UK - find out how we got to where we are today.
We are always looking for talented individuals to join our growing team - if you are highly motivated with a positive attitude we want to hear from you.
Discover the latest events we will be hosting, exhibiting, and attending, where you can learn more about our industry-leading digital compliance solutions.
A beneficial owner refers to the natural person(s) who ultimately owns or controls a legal entity, business or arrangement. Identifying beneficial owners is a crucial step in the AML process as it helps prevent money laundering, terrorist financing and other illicit activities by understanding the individuals behind complex corporate structures or entities.
Ultimately, disclosing the beneficial owner behind a business makes such legal entities less attractive for criminal activity, including money laundering.
Beneficial owners aren’t always easy to identify, with some entities having a complex hierarchy that isn’t transparent. Sometimes, but not always, the beneficial owner is different from the legal owner, and in some cases, beneficial owners can be an organised group of people rather than an individual. Put simply, a beneficial owner can be identified as:
An individual or a trust that owns a minimum of 25% of the legal entity.
Any individual who holds the ability to manage the control of the legal entity.
Recital 13 of 4AMLD (The 4th Anti-Money Laundering Directive) also outlines that beneficial ownership can include control by other means. As the recital states: ‘Control through other means may, inter alia, include the criteria of control used for the purpose of preparing consolidated financial statements, such as through a shareholders’ agreement, the exercise of dominant influence or the power to appoint senior management’.
Beneficial ownership checks are crucial to understanding your onboarding customer and the risks involved in that onboarding process. Just like other AML check procedures, a beneficial ownership evaluation should be carried out with methodical diligence, with the failure to ascertain such information potentially leading to major reputational damage and potential legal issues.
Performing beneficial ownership evaluation as part of your AML checks helps to reveal hidden associates and connections to entities, allowing you to assess the likelihood of illicit activities. When carrying out these checks, some companies may prefer to perform Enhanced Due Diligence (EDD) on prospective businesses with more complex business structures. This process helps to get to the root of an entity’s financial model and main source of wealth.
Assessments on beneficial owners should be included when carrying out AML checks, with this process involving ascertaining personal and financial information from the entity. This starts with identifying the individual(s) under the customer due diligence (CDD) process. Once this has been established, the beneficial owner can fill out the following requirements:
Personal information (inc. full name, date of birth, address and contact details).
Proof of identity (inc. passport, driver's licence or ID card).
Documentation of ownership or control (inc. disclosure of shares and shareholder register).
Proof of wealth source - documentation that demonstrates how wealth has been acquired (inc. bank statements, investment documents).
An ultimate beneficial owner (UBO) is the individual who holds ultimate control and ownership over an entity. Unlike beneficial owners who may reap gains from the control of an entity yet may not fully own it, a UBO is a person at the very top of the financial hierarchy, owning the company directly or through a trust. Anyone who holds over 25% of the shares or voting rights to an entity is legally named the UBO.
Individuals who qualify as a UBO include:
Shareholders
Power of Attorney
Legal guardian of an underage person
Someone with formal or informal control of an account holder
At SmartSearch, we make carrying out AML checks and CDD as straightforward as possible. Offering a comprehensive platform that offers access to the Dow Jones Watchlist for ID verifications, we also provide a space where you can carry out all your AML checks in one place, including sanctions screening and ongoing monitoring.
AML checks are essential once you have identified beneficial owners and ultimate beneficial owners, and our checks make sure that no red flags are raised between you and the client after you go into business.
With SmartSearch AML compliance has never been easier. Contact us now to discover more about how we can help to optimise your business.
As outlined in the Beneficial Ownership Guide: ‘A beneficial owner is always the living, breathing human being who ultimately profits from the company’s activities, or controls the company’s activities. It is never a company, other legal entity, or a nominee/proxy’.
Identifying a beneficial owner is a crucial stage of a business’ AML checks.
An ultimate beneficial owner is an individual who ultimately controls the entity in question. They hold ownership over the entity directly or through a trust. Legally, if an individual holds 25% of the shares or voting rights to an entity, they are the ultimate beneficial owner (or UBO).
A beneficial owner and an ultimate beneficial owner exist in the same financial hierarchy, but they hold different definitions. While a beneficial owner might benefit from the financial gain of ownership, they don’t hold ultimate control of the entity. Ultimate beneficial owners do hold this power, owning or controlling an entity entirely.
