Identification and verification of Ultimate Beneficial Owners (UBO) of legal entities remains a hot topic among both the AML regulated sectors and corporations complying with the ABC and International Sanctions regimes. Governments, too, are catching up with the trend by either introducing or upgrading the beneficial ownership legal frameworks and related registries.
Despite these developments on the legal and registry fronts, the obligated institutions however are still facing significant practical challenges.
Sylwia Wolos, our Head of Product Strategy and expert on UBOs, identifies three key practical challenges for businesses in meeting their UBO obligations: availability, accessibility and reliability of Beneficial Ownership (BO) information.
1. Lack of Data Availability
UBO registers across different jurisdictions are often incomplete or non-existent, creating a lack of availability of UBO data. According to World Bank data, only 64 economies (out of 194) have a legal framework in place for collecting UBO information. UBO obligations for the financial sector and other entities are relatively new. Government legislations have not yet been developed thoroughly enough for there to be a clear-cut understanding on how to obtain and disclose UBO information.
Even in advanced, digitalised economies such as Germany there are significant challenges in UBO data availability. Up until 2021, data in the German Transparency Register was largely patchy due to exemptions which allowed entities whose data had been registered in other public domains to not register with the GTR. The Transparency Register and Financial Information Act of August 2021 was introduced to address this inconsistency. Still, gaps in data persist but the introduction of the Act highlights the growing importance of UBO.
2. Accessibility Across Jurisdictions
Companies have a substantial data gap in terms of accessing credible information on BO, especially within global investigations. On the policy level, there is a clash between data transparency and protecting privacy. Legislation on how UBO transparency should affect privacy protection is underdeveloped.
On the practical level, accessing UBO information can prove to be a very costly part of KYC checks. Certain jurisdictions require local presence to access UBO repositories, especially where data is stored in a non-digitised format.
There are also significant differences in how jurisdictions collect, store, and define UBO data, leading to inconsistencies and fragmentation. In Latin America, for example, there is substantial discrepancy in the status of UBO registers between different countries. These inconsistencies significantly impede global UBO investigations.
Image from Global Financial Integrity, 2021.
Data stored in UBO registers across jurisdictions is often not very reliable. UK’s national UBO register, People with Significant Control (PSC), despite being one of the most advanced BO registries in the world, has certain problems in terms of PSC identification and data standardisation that makes the data within it not perfectly reliable. This is largely due to a lack of standardisation of data fields, resulting in erroneous and inconsistent information across different PSC profiles.
UBO registers always become repositories for self-disclosed information that is not independently verified. Simply relying on this self-disclosed information is not enough and enhanced due diligence checks are required to verify publicly available data. This disrupts the cost effectiveness of UBO investigations.
A Truly Global Solution
Criminals always hide behind a variety of complex ownership structures that can be hard to wade through. Given the challenges in accessing reliable UBO data, companies need a cost-effective global solution that addresses the availability, accessibility, and reliability gaps in data.
The Ground Truth Intelligence Platform provides a tech-enabled solution to support global UBO investigations. With Network Partners in over 250 jurisdictions, we simplify the sourcing and management of global UBO information. Our curated and vetted Network Partners have expertise in local regulations and databases, allowing businesses to retrieve data securely and quickly.