Risk & Compliance Glossary
- Risk & Compliance Glossary
- What is Anti-Money Laundering (AML)?
- What is a beneficial owner and what is beneficial ownership?
Beneficial ownership is when any natural person ultimately owns or controls a contracted counterparty or legal entity. The ultimate beneficial owner (UBO) is the natural person on whose behalf a transaction or activity is being conducted.
Understanding beneficial ownership of an entity is fundamental to an effective risk mitigation program regardless of geographic location.
Finding important information on and ascertaining the identity of a beneficial owner
In order to hide one’s ownership interest, a UBO’s identity is often shielded by shell companies. While this can be done for a variety of legal purposes, many UBOs are associated with tax evasion, money laundering, bribery, corruption or other illicit activities including financial crime.
Though this information is often requested of third parties and customers before business dealings begin, sourcing and validating customer-provided data can be difficult and time-consuming as you cannot rely solely on a third-party’s own declaration of ownership.
Why beneficial ownership checks are important
Ensuring a clear understanding of the risks associated with a customer or third-party is a crucial safety check to minimize risk.
Failing to discover critical beneficial ownership information can lead to significant reputational damage and potential legal liability.
The establishment of and recent changes to regulations such as the 5th Anti-Money Laundering Directive (AMLD5), Special Administrations Anti-Money Laundering and Counter-Terrorist Financing Ordinance in Hong Kong and FINCen’s explicit customer due diligence (CDD) requirements in the U.S. means understanding beneficial ownership for the companies with whom you do business is key to assessing the full picture of risk.
The ability to Incorporate UBO data into existing profiles means that companies no longer have to turn to additional tools to determine beneficial ownership.
Dow Jones Beneficial Ownership data is sourced through the trusted information provider Dun & Bradstreet and contains the beneficial owners of approximately 69 million entities, supplemented by additional public sources such as company documents and public filings.
