UBO - How Far Do you Go?

The requirement to ascertain the identity of the ultimate beneficial owner(s) of client entities can place a heavy administrative burden. The use of the word “ultimate” is unambiguous. Where there is a chain of ownership, you must get right to the end of the chain. Only then do you truly know who your client is – which has always been a fundamental AML requirement.

The temptation when faced with a relatively complex structure may be to trace ownership up one or two levels, but then to take the view “above that we don’t have specific information, but we have been told that X is the owner and that is good enough for us. We can’t spend our whole lives gathering this information.”

That temptation should not be entertained. Firstly and most importantly because it means you do not have the knowledge you need as to ultimate beneficial ownership. And secondly because you do not have the documentation you need to demonstrate that you have verified ownership.

Why should it be difficult to gather the relevant information, anyway? Of course bureaucracy is tedious, and does not make money. Nobody welcomes a request for paperwork. But the information needed should not take long to put together, if it exists. The ultimate client should have no reason to be reluctant to provide it to you. And any other service providers involved in administering entities in the structure should have the material themselves and should be prepared to provide it on request.

If repeated requests for proof of ownership are met with silence or with obstruction, however polite, you should not be deterred. You should be concerned. If the evidence provided does not completely fill the gaps, you should press on with your requests until the gaps are filled.

You may be confident that you have the necessary CDD on the person you understand to be “the client” – you may have met him and corresponded with him – but without the necessary documents evidencing the chain of ownership of all the relevant entities, how can you be sure that that “client” is in fact the sole ultimate beneficial owner of those entities? Could there be other UBOs you do not know about? If you do not know they exist, you obviously cannot satisfy yourselves they are not money launderers.

Anything less than a complete chain of ownership, fully evidenced, is simply inadequate. And regulators and prosecutors are likely to be increasingly tough on those who fall short, especially when taking on new business or where an existing client has given cause for concern for other reasons.

• Show All Hot Topics

Member Comments

Sign in to leave a comment.