The fight against money laundering and terrorist funding has intensified in recent years, with stronger legislation ensuring financial transparency in firm ownership.
A beneficial owner is someone who owns or controls more than 25% of a business's shares or voting rights or has other control over the firm or its management. Many criminals would intentionally use the opacity of corporate vehicles to disguise their identity, the true purpose of the account, and the source or use of funds or property associated with the corporate vehicle.
Beneficial ownership transparency is intimately tied to the efficacy of a jurisdiction's anti-money laundering (AML) systems and their critical role in preventing, discovering, prosecuting, and penalizing financial crimes. As a result, it is critical to a jurisdiction's resistance against ML/TF threats.
Allowing such beneficiaries to remain anonymous has facilitated the hiding of significant problematic financial behaviour, which is increasingly a source of worldwide concern, and many countries are seeking greater openness regarding beneficial ownership. As governments work to increase financial transparency, making beneficial ownership declaration as simple and affordable as feasible would encourage compliance and contribute to the eventual goal of greater corporate responsibility.
Criminals will continue to employ complicated business structures and shell firms to conceal their identity, the source of their cash, and the purpose of their funds. To address this, regulated organisations must do extensive checks when onboarding consumers to see whether they pose a compliance risk, which might result in a large fine or reputational harm if they do.
The struggle against money laundering has intensified since stronger legislation such as 4MLD and MLR2017 requiring financial transparency from EU-obligated companies doing business with commercial clients were implemented. Various member nations have enacted legislation to enforce reporting obligations, which is also a mandate of FinCen in the United States.
There are few and far between national UBO registrations. KYC professionals must do their own research in the absence of these registries. AML legislation lacks a key foundation in the absence of robust national UBO registers. Despite this, it is the organisations that are punished for noncompliance. As a result, firms continue to pay a high price, both in terms of direct investment and personnel hours, to comply with AML requirements. Despite such significant expenditure, there is no indication that compliance will become any simpler.
However, the difficulty of finding and confirming UBOs are significant, but the risks of non-compliance are considerably greater.
By combining encompass with your existing KYC and onboarding solutions, you may drastically decrease the time, cost, and risk associated with customer due diligence operations while simultaneously improving the customer experience and showing strong compliance to authorities.
When it comes to avoiding compliance penalties and lowering onboarding delays, your firm is basically on its own. Fortunately, automated solutions to reduce your compliance load are on the rise. These methods can help KYC professionals spend less time detecting UBOS while also lowering the overall cost of UBO verification.
Criminals do not follow the law; hence some physical intervention will always be required. However, rather than applying the manual method to all situations, having an automated approach to Ultimate Beneficial Ownership verification, and selecting those that require further due diligence. Only when there is a red flag can the compliance officers' abilities and knowledge be used.