Identifying Ultimate Beneficial Owners in Asia

 UBOs may seek to exploit intricate corporate structures to obfuscate the true illicit nature of their business or identity in an attempt to evade regulatory scrutiny. In March 2022, the FATF agreed on tougher global beneficial ownership standards in its Recommendation 24 by requiring countries to ensure that competent authorities have access to adequate, accurate and up-to-date information on the true owners of companies. It is imperative that firms determine and confirm the UBOs of their corporate customers to effectively evaluate risks in line with broader AML efforts.

In an increasingly interconnected and complex global economy, the need to identify and verify Ultimate Beneficial Owners (UBOs) has become a top priority for businesses operating in Asian markets. UBOs play a critical role in corporate structures, and their identification is essential in the fight against money laundering, fraud, and other illicit activities. This article outlines the steps companies can take to identify the UBOs in Asian markets, ensuring compliance with the updated FATF standards and enhancing overall risk assessment and anti-money laundering (AML) efforts.

Start with Comprehensive Due Diligence

The first step in UBO search is to conduct comprehensive due diligence on all corporate customers. This process should include obtaining detailed information about the company's ownership structure, governance, and shareholders. This initial step lays the foundation for further investigations and ensures that the company has a clear understanding of its customers' corporate structure.

Identify Immediate Shareholders

To identify UBOs, it's essential to trace the ownership chain from the company's immediate shareholders. These shareholders may hold a significant stake in the business or exercise significant control. It's crucial to identify each shareholder and understand their roles within the company.

Determine Ownership Percentage

Understanding the percentage of ownership held by each immediate shareholder is a critical part of beneficial owner identification. In some cases, a shareholder with a relatively small ownership percentage may have substantial control over the company. Accurately determining ownership percentages is crucial to assessing the true influence and control held by each shareholder.

Consider Indirect Ownership

In some cases, UBOs may not be direct shareholders but may exercise control through intermediate entities or complex corporate structures. It's important to investigate any indirect ownership arrangements and identify the individuals or entities ultimately benefiting from the company's activities.

Cross-Reference with Public Registries

Many Asian countries have established public registries or databases where corporate ownership information is made available to the public. Cross-referencing the information obtained through due diligence with these registries can help verify the accuracy of the data and provide additional insights into UBOs.

Perform Enhanced Due Diligence

In situations where the ownership structure appears complex or non-transparent, enhanced due diligence is essential. This may involve conducting additional background checks on shareholders, reviewing financial records, and engaging third-party investigative services to uncover any hidden UBOs.

Review Legal Documents and Agreements

Reviewing legal documents, such as shareholder agreements, articles of incorporation, and partnership agreements, can provide valuable insights into the ownership structure. These documents often contain provisions related to ownership and control that can help identify UBOs.

Interview Key Personnel

Engaging with key personnel within the company can provide valuable information about UBOs. Interviews with company executives, directors, or other individuals involved in the management and decision-making processes can shed light on the true owners and their influence.

Continuous Monitoring

Identifying UBOs is not a one-time process; it requires ongoing monitoring. Changes in ownership, corporate restructuring, or other significant events can alter the UBO landscape. Continuous monitoring ensures that companies stay updated on any changes that may impact their risk assessment.

Compliance with Regulatory Requirements

Ensure that the identification and verification of UBOs align with the regulatory requirements specific to the Asian markets in which the company operates. Compliance with local laws and regulations is critical to avoid legal repercussions.

In conclusion, identifying UBOs in Asian markets is a critical component of risk assessment and AML efforts. With the updated FATF standards emphasizing the importance of accurate and up-to-date information on the true owners of companies, businesses operating in Asian markets must be proactive in identifying and verifying UBOs. By following the steps outlined in this article, companies can enhance their compliance with regulatory requirements, reduce the risk of illicit activities, and contribute to a more transparent and accountable corporate environment in Asian markets.