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Ultimate Beneficial Owner (UBO) | AML glossary

Ultimate Beneficial Owner (UBO) Definition and AML compliance meaning.

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Ultimate Beneficial Owner (UBO) definition: What it means in AML compliance.

An Ultimate Beneficial Owner (UBO) is the individual who ultimately owns or controls a business, even if that ownership is indirect through layers of companies or trusts. Identifying UBOs is a key part of Know Your Business (KYB) and Anti-Money Laundering (AML) compliance, ensuring transparency and preventing financial crimes like money laundering and tax evasion.

How is a UBO defined?

Regulations vary by jurisdiction, but a UBO is generally someone who owns at least 25% of a company’s shares, exercises significant control, or financially benefits from its operations. However, ownership isn’t always straightforward – some individuals may hold influence through corporate structures, trusts, or nominee arrangements.

Examples of UBO structures

UBOs can be hidden in various ways, making identification complex:

  • Direct Ownership: A person owns more than 25% of a company’s shares, making them the clear UBO.
  • Layered Corporate Ownership: If Company A owns Company B, and an individual controls Company A, they may still be the UBO of Company B.
  • Nominee and Trust Structures: A trust or nominee shareholder may hold assets on behalf of the real owner, making it harder to identify the UBO.
  • Split Ownership Below Thresholds: Multiple individuals, each owning just under 25% of a company, may still act together as UBOs in some cases.

Why UBO identification matters

UBO transparency is a critical component of AML compliance. Criminals often use shell companies to hide illicit funds, and regulations like the EU AML Directives, the UK’s Economic Crime Act, and FATF Recommendations require businesses to verify who is really behind a company. By identifying UBOs, firms can avoid engaging with sanctioned individuals or politically exposed persons (PEPs), reducing legal and reputational risks.

Challenges in identifying UBOs

UBO verification isn’t always straightforward due to:

  • Complex Corporate Structures: Multi-layered ownership across different jurisdictions can obscure the real owner.
  • Use of Nominee Shareholders & Trusts: Individuals can hide behind legal arrangements that make it difficult to trace control.
  • Jurisdictional Differences: UBO definitions and disclosure requirements vary globally, making compliance challenging.

How technology helps verify UBOs

Advanced AML technology plays a vital role in simplifying UBO verification. Automated KYB solutions can retrieve data from corporate registries, understand complex ownership structures, and provide ongoing monitoring to detect any changes in control. By leveraging these tools, businesses can streamline compliance processes while ensuring they meet regulatory obligations.

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