There can be little doubt that multiple beneficial ownership definitions, a lack of public ownership registries, the complexity of legal corporate vehicles, and the use of offshore financial centers represent significant challenges to organizations affected by the latest Anti-Money Laundering/Counter-terrorist Financing (AML/CTF) regulations. Transparency over ultimate beneficial ownership (UBO) is still the exception, not the rule, in many tax jurisdictions.
Getting to the detail has never been straightforward. To calculate UBO, disparate compliance teams have to rely on multiple reports and spreadsheets, as well online business information reports, which are often inflexible, inaccurate, and do not necessarily integrate with other systems and data sources. Typically, it can take days to manually identify attributes (confirming self-certified information such as company name, address, and registration details), verify those attributes (such as ownership levels and financial reports), and, if deemed necessary, conduct enhanced due diligence. In the meantime, the structure being investigated can shift, with small changes in one part affecting the whole.
Fundamentals of knowing-your-customer
Being able to quickly see how an organization is structured is fundamental to the know-your-customer (KYC) process. Large financial institutions need rules-based workflow that shows the organizational structure in a modern way to support KYC automation.
By far, the most common approach is to bring workflow and content together through application programming interface (API) technology. This dramatically accelerates the data-capture process and ensures workflows can be built as needed, thereby enabling straight through-processing where possible and directing complex remediation to the right teams quickly.
Instead of referring to online business information reports and spreadsheets to calculate UBO, the compliance analyst makes a query on the business entity in question through the API. This triggers analysis of the direct, indirect, and looping ownership structures of the business entity, and delivers within seconds the relevant shareholders and their percentage ownership stakes. It also supports the building of an alerts methodology for changes to ownership.
Having the right focus
By breaking the remediation cycle and reacting to changes immediately, valuable resources can focus on the right customers, assessing changes that matter, and acknowledging those that are not of material concern. Furthermore, the ability to identify beneficial owners in a few clicks not only helps fast-track the standard on-boarding process, but frees up internal resources to focus on more complex investigations, as well as reduces exposure to reputational risk (such as screening for potentially damaging politically exposed people, or PEPs) and reduces operational costs.
Exploiting on-demand (data-as-a-service), timely, accurate, and reliable data sources that pull together global corporate linkage on business entities and personal share ownership means that organizations can be confident they have achieved the single customer view they need to meet compliance challenges and mitigate reputational risk.
Better still, allowing relevant and high-quality data to be shared across the enterprise can help organizations move beyond compliance as a box-ticking obligation to become more agile and competitive.
All these insights and much more is now available in the e-book:
Understanding Beneficial Ownership Structures
Article written by The Editors, Dun & Bradstreet