5 Steps in the UBO Verification Process

The Ultimate Beneficial Owner, or UBO for short, is a verification process that confirms the identities of the real individuals who own or control a legal entity.

It’s the core part of the process that comes with the Know Your Business and Anti-Money Laundering compliance – KYB and AML for short.

So what are the steps that come with the UBO verification process, and why is it so important to have for a business?

Why UBO verification is essential

Organisations are legally required under AML and Counter-Terrorist Financing frameworks to verify the identities of their clients’ ultimate owners. Failing to do so can often result in severe financial penalties, as well as criminal sanctions.

Identifying hidden ownership and establishing a UBO’s identity can help to flag if an individual is subject to any international sanctions, classified as a Politically Exposed Person or linked to bribery.

It also stops the misuse of corporate investments for tax evasion, as well as corporate fraud. Partnering with untrustworthy or illicitly funded entities can often destroy your brand trust, so it’s imperative to verify UBOs, ensuring transparency and accountability in your business relationships.

5 Steps in the UBO Verification Process

It’s good to understand the steps that are taken during this verification process, so that you know what to expect as and when you need to confirm the legitimacy of an individual or business.

1. Collect company data

Begin by collecting fundamental details about the target business. You’ll want to gather the company’s official name, registered address, registration number and a list of top management. 

This can then be cross-referenced with official corporate registries or authorised business databases to ensure legitimacy. 

2. Map the ownership structure

Be sure to analyse the entity’s share register, articles of incorporation and shareholder agreements. This helps to determine direct or indirect ownership. If the shares are being held by other corporate entities, then you must trace the ownership chain upwards through all holding companies until you uncover the person or persons behind them.

3. Identify the UBOs

Calculate the total ownership percentage, indirect control each individual holds, as well as their voting rights. UBO is defined as a natural person who owns or controls 25% or more of the shares or voting rights. Some regions will have high-risk sectors and may enforce a stricter threshold of 10%.

If no individual hits this threshold, senior management officials are typically identified as the UBOs instead.

4. Verify the UBOs

It’s helpful to collect official information on the identified UBOs, such as their full name, date of birth and residential address.

Verify this data using independent and reliable documents like government-issued photo ID and a recent proof of address, like a utility bill or bank statement.

5. Conduct an AML check and continuous monitoring 

Run the verified UBOs through AML protocols. This involves screening them against global sanctions lists and checking for PEP status. Review for adverse media, too. All findings, documents and calculations should be thoroughly recorded for audit purposes, as well as ongoing monitoring in place for any future ownership changes.

It’s an important process to be aware of and to conduct, so make sure to do it for your business.