Identifying the ultimate stakeholder – or Ultimate Beneficial Owner (UBO) – might be the biggest challenge in your KYC process. Especially in a time where companies are setting up the structure of their organisation in such a way that they will have the most financial benefit from it. For example, to create a favourable tax climate. The fact that this results in a large cross-border spider web is more often the rule than the exception. But how do you gain insight into the entire family tree of an organisation without slowing down your KYC process?
The UBO: Know who you are really dealing with
It all starts with the identification of the UBO. As a rule, natural persons are considered to be an UBO if they have a direct or indirect interest of more than 25% in an entity through shares or voting rights, or if they exercise direct control in some other way. If this is not the case, senior management or executive staff will be designated as UBO. This is then called the Pseudo-UBO.
Since an organisation often consists of several layers, subsidiaries and parent companies, it is complex to find out who is the actual beneficiary of the company.
Your risk if you do not know who the UBOs are? You could just do business with a company that is indirectly linked to, for example, illegal weapon trading, terrorist funding, child slavery or money laundering. Of course, you want to prevent that from happening.
Can the UBO be determined with certainty?
It is very likely that the UBO of an entity is not established in the country of the organisation at all. For example, almost 70% of the BVs in the Netherlands are directly linked to another company in the Netherlands or another country through shares. In a number of countries, a UBO register already exists, in which all UBOs are registered. These countries currently have no legal obligation to check the accuracy of this information. This means that at this moment it is not easy to determine the UBO’s with certainty and not easy to get to know with whom you’re actually doing business.
How data can reveal the mystery
The lack of transparency is the biggest challenge for most organisations. In addition, meeting the minimum legal conditions is not enough to protect yourself as a company. International companies must take all necessary measures to reduce risks.
An external source can help to map this out. Dun & Bradstreet’s data cloud is an example of an external source. This data cloud is the most complete and reliable source to gain insight into the Dutch and foreign relationships of your business partners, ranging from small lesser-known companies to the largest multinationals with thousands of offices.
Get answers to your questions
With external data you will get answers to the following questions:
- What are the real (registered) name and address of your customer?
- Which activities does your (potential) customer perform? It is possible that the actual work does not correspond to the activities that they have indicated. This manifests itself as a ‘red flag’ to which you should pay attention before you start working with this party.
- Does your customer belong to a larger company structure? For example, does your client have a holding company? Or a daughter company? If so, who are these other companies in the same family tree? The company structure can extend beyond national borders. Even if your customer is located locally, you will need access to global data.
- Who are the beneficial owners of your customer? Perhaps more important: who are the beneficial owners of your customer’s entire family tree?
- What is the identity of the most important directors? Who are the most important directors within their parent company? Do these directors also have positions in other companies? If so, are these companies legitimate?
By extracting these insights from one single source, you will speed up the KYC process and ensure a complete, global view of your customers and suppliers. Want to know more about how to simplify and accelerate the KYC process? Read more about our webtool indueD.
