The role of digital identity in beneficial ownership verification

Financial institutions are rapidly evolving how they onboard clients and meet regulatory obligations, with digital transformation at the core. Nowhere is this shift more critical than in the need to accurately identify and verify beneficial ownership, a foundational element of effective Know Your Customer (KYC) practices.

For banks, regulators, and corporate clients alike, the ability to verify the identity of a business entity and its ultimate beneficial owners (UBOs) is critical, not just for compliance with Anti-Money Laundering (AML) regulations, but also for ensuring transparency, reducing onboarding times, and improving risk management. Achieving this at scale requires a smarter, more connected approach to entity and ownership verification.

Business Entity Verification and the role of digital Identity

One of the emerging solutions enabling this shift is the development of corporate digital identities (CDIs). Digital representations of a company that consolidate verified data about its structure, ownership, and legal standing.

By combining customer-provided data with authoritative sources, such as corporate registries and commercial data providers, banks can use CDI models to build a verified digital profile of the customer. These profiles include details about ownership structures and control, enabling better identification of UBOs and streamlined onboarding.

What makes this approach particularly powerful is its potential to be reused across business lines and jurisdictions. Once verified, the digital identity can support secure information sharing, reduce the need for repeated document requests, and ensure that ownership information remains current and accurate.

Why beneficial ownership verification still falls short

Despite regulatory focus, beneficial ownership verification remains a sticking point in KYC and onboarding processes. This is often due to:

• Fragmented data across jurisdictions
• Repeated requests for the same documentation
• Manual checks that delay onboarding
• Limited standardization for data formats and verification

As a result, many corporate clients are subject to long onboarding cycles, inconsistent experiences, and even security risks, particularly when sensitive documents are transmitted via email.

To resolve these issues, financial institutions are increasingly looking to standardized, digital approaches to business entity verification that can support automation, auditability, and cross-border compliance.

The importance of standards for UBO transparency

Standards play a vital role in beneficial ownership verification. Whether it's the use of Legal Entity Identifiers (LEIs), FATF recommendations, or the OECD’s Common Reporting Standard (CRS), consistency in how data is defined, collected, and shared is essential.

By adhering to standards, banks can:

• Improve interoperability across platforms and geographies
• Streamline data-sharing with regulators and counterparties
• Support automation and real-time monitoring of ownership changes
• Enhance auditability and reduce compliance risk
• Increase efficiency of the end-to-end process

Standardized digital identity frameworks also support role-based access control, ensuring that only authorized users can access sensitive ownership data, and that all actions are tracked and auditable.

CDI and UBO: A combined path to efficiency

Where CDIs come into play is in their ability to bring together verified ownership data into a single, secure corporate digital identity. This structure enables banks to:

• Verify complex ownership hierarchies with ease
• Reduce manual reviews and accelerate onboarding
• Strengthen data security through encrypted, trackable exchanges
• Ensure a consistent customer experience across products and regions

For corporate clients, this approach offers relief from repeated document requests and delays. For banks, it provides a more efficient, scalable way to meet regulatory demands while maintaining customer trust.

The future of KYC depends on smarter identity infrastructure

As regulatory expectations around beneficial ownership continue to evolve, business entity verification will become a defining capability for banks seeking to modernize their KYC programs.

By adopting a corporate digital identity framework, underpinned by strong standards, automation, and interoperability, financial institutions can dramatically improve how they manage risk, serve customers, and comply with global regulations.

Whether labelled as a corporate digital identity or simply treated as an enhanced business verification layer, this shift represents a necessary step toward building a more transparent, secure, and responsive financial ecosystem.