The EU UBO (Ultimate Beneficial Owner) register is a central database that contains information about the beneficial owners of companies and other legal entities within the European Union. It is designed to increase transparency and combat money laundering,
terrorist financing, and other financial crimes.
Recently, there have been some
changes to the EU UBO register access rules, which may impact compliance requirements for businesses operating within the EU. Specifically, EU member states have been given the option to restrict public access to UBO registers for certain categories of
entities, such as companies that are not publicly traded.
This means that compliance requirements may differ depending on the country in which a business is registered or operates. For example, in some EU member states, companies may be required to provide additional documentation or information to authorities
in order to access the UBO register. In other member states, such as Luxembourg and the Netherlands, access to the register may be restricted entirely.
Overall, businesses operating within the EU should be aware of these changes and ensure that they are complying with the relevant regulations and requirements of each country in which they operate.
Consulting the experts
A first port of call to staying on top of changing requirements is to leverage the advice and training of compliance experts. These experts can help to ensure that all necessary information is being provided. You may already have these professionals available
in house, or you may have to look to external consultants and outsourcers.
Without access to the right documentation, firms may unknowingly be creating pathways for their clients to launder money through. This is ‘UBO exposure’. These clients are able to conceal the true identity of their beneficial owner(s) through complex structures,
such as using shell companies or trusts, to obscure the true ownership of assets. This allows them to move funds across borders in incognito mode.
As a result, it is crucial to be aware of the steps that companies need to take in order to identify and verify the UBO of clients, as mandated by anti-money laundering regulations. These include collecting and verifying identity documentation of directors
and shareholders, reviewing corporate records and conducting politically exposed person and sanctions checks on beneficial owners.
If some countries still provide access to their public UBO register, then information can be pulled directly from these registers. But as has now happened in several countries, what do you do when this access is totally cut off?
Working around zero access
If you can’t access public registers, then you need to have your own set of AML procedures in place. Compliance professionals can consider other sources to obtain information, such as shareholding registers and beneficial ownership charts. These can be used
as a starting base to map out levels of ownership.
The time taken to onboard clients from these jurisdictions will likely rise. So companies need to initiate the due diligence process as early as possible to allow for the manual collection of various documents, such as certifications, that may be needed
for verification purposes (especially if structures appear more obscure). Creating as much transparency as possible is key.
But how do you implement such steps? To make sure this process is uniform across the company, you need to have the tools and culture to go with it.
Embracing technology to ensure transparency and scalability
The nature of the changes simply advocates for agile and scalable AML processes. Attempting to manually extract details from registers on complex ownership and corporate structures can be an arduous process for even the most accomplished compliance professional;
there are, amongst other things, different languages and jurisdictions to tackle alongside time and money costs.
What firms need is an anti-money laundering platform that is able to consolidate different rules for different regions and any changes to these rules as they happen. In that way, priorities for checks can be set up accordingly. As rules may shift for different
countries depending on UBO access, scalability and transparency are crucial.
These AML platforms can act as a central hub of data that can automate this data extraction and compile the results in digestible formats for each case; these can then be assessed by compliance professionals. And to truly thrive, this process needs to fall
under a culture of compliance.
Establishing compliance across the board
What exactly is this? A culture of compliance covers people, process and technology and ensures that everything is aligned to the same AML process. Adopting a culture of compliance can mean that any changes to UBO register access rules are understood across
the firm and that an appropriate level of training is on offer.
This culture starts from the top and can be fostered with the help of compliance experts. For example, a process needs to be in place to identify and flag any red flag behaviour. The people, i.e. the employees, need to know what this looks like and how they
can act on it. And then technology is needed in order to facilitate this process. Each affects and can help the other.
Not ideal, but compliance is still achievable
It’s hard to say how the changes will play out and whether they will stick. As a society, we need to strike the balance between ensuring data privacy but also providing transparency with corporate structures that can mitigate against bad actors and gateways
for illicit activity.
Yet as it stands, with different rules and jurisdictions across the continent, the removal of access to the register simply enhances the need for firms to embed the necessary knowledge, support, tools, technology and culture to ensure compliance. It’s not
an ideal change for AML, but the methods are still there to keep money launderers at bay.