Hala Bou Alwan Image Credit: Supplied

Dubai: UBO stands for ‘Ultimate Beneficial Owner’ -- or the person or entity who is the ultimate beneficiary of the company. The Financial Action Task Force (The inter-governmental body which sets international standards that aim to prevent money laundering, terrorist financing activities, other financial crimes and the harm they cause to society) defines the ‘Ultimate Beneficial Owner’ as the “the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted.”

As part of transparent governance, Financial Action Task Force (FATF) recommendations and mutual evaluation requirements, the United Arab Emirates Cabinet Resolution no (58) was issued the second half of year 2020 concerning regulation of the real beneficiary procedures (“UBO Regulations”). The Resolution applies to all entities licensed in the UAE, excluding the following: Entities in financial free zones (Abu Dhabi Global Markets and Dubai International Financial Centre as they have their own UBO regulations);

• This regulation required specified registries for UBO, nominee director, managers, partners and shareholders .

When it comes specifically for UBOs, as per the regulation, “is a natural person who ultimately own or control or have the right to vote with minimum 25% shareholding of the company, whether through direct or indirect ownership or who have the right to appoint or dismiss the majority of the Directors/Managers of that company. If no natural person satisfies the foregoing condition, then any natural person who exercises control over the company through other means shall be deemed to be the UBO and if no natural person satisfies this condition then a natural person who is responsible for the senior management of the company will be deemed the UBO”.

Despite the deadline was 27 October 2020to satisfy these requirements, for some companies this is not an easy exercise & could not be satisfied fully when considering their ownership and control structures to properly identify their UBOs, especially if there are internal resolutions concerning control, rights, obligations, and management, or with complex structures having multiple layers of ownerships which may affect who is considered a UBO under the UBO Law.

UAE has taken especially important step with this regulation aligned with other AML / financial crimes regulations to prevent the abuse of legal persons which was outlined in the Financial Action Task Force (FATF) UAE mutual evaluation for the purpose of committing several crimes like Money Laundering, terrorist financing, fraud, tax evasion, ghost firms schemes & many others.

Yes, if you are a party conducting Due Diligence, this might take time, and needs all of us to start thinking differently when Identifying who is really the ultimate Beneficial owner even if it doesn’t look this way from our interactions with the companies, but it’s a very good step to uniform transparent compliance measures, registrations and reporting mechanism in this matter.

To satisfy the minimum requirements you need to have to know the Ultimate Beneficial owners, you should have the mindset to always look beyond the documents you have and conduct your due diligence beyond the people you meet claiming as the UBOs, and to know that UBOs is not restricted to your clients only, however, also applies to your suppliers and third parties. This is one of HBA consultancy’s expertise where we help companies understand the compliance requirements to identify their UBOs alongside with its practical measures.

Companies need to do the following:

- Verify the legitimacy and the accuracy of the company records (full and up-to-date information regarding trade license, registration number, firm’s name, address, official status, and top management employees, shareholders, authorised signatory, and many others).

- Define the shares’ percentage, control & management

Identify natural or legal persons who have a percentage in shares or interests, management control, authorisations to have certain controls and determine if the benefit and ownership are direct or indirect.

- Define who has the most benefit?

Following the last step, this happens by analysing the total percentage of shares, management control, authorised benefits, and ownership stake of every individual.

- Know your UBOs

All of those who were categorised as UBOs have to go through the full AML/KYC check.

- Risk Based approach

You have to categorise your UBOs as high, medium, or low Risks based on several factors like country of origin, work base, nationality, services & offerings, PEPs, line of business, business clients, source of income, funds and many others .

- Ongoing monitoring and screening & regular updates of your KYCs

Finally, when you feel it is overwhelming to analyse the several layers of the company & it’s becoming so complicated, ask yourself a simple question who benefits most regardless of the chain of control!

Abou Hala Bou Alwan

Hala Bou Alwan is the Founder and CEO of Hala Bou Alwan (HBA) Consultancy firm specialised in Governance, Compliance, CSR, AI & Financial and Cyber crimes’ advisory and training. In addition to this, Hala is the Co - Founder of H.A.D Consultants specialised in self - empowerment events adhering to the UN Sustainability Developments Goals . She is a lawyer, member of the Lebanese Lawyers’ Bar Association who holds dual Masters degrees LLM specialised in Artificial intelligence & Law from Universite La Sagesse, Lebanon and another Master’s degree ELLM in International Business Law from Boston University USA. Hala as well is a member at the Arab Monetary Fund Regional Fintech Working Group, a contributor at Forbes Middle East, and registered Trainer and speaker at several Governmental Authorities & highly reputable organisations including Union of Arab Securities Authority , IOSCO - International Organisation for Securities Commissions , Thomson Reuters , Forbes Middle East, Capital Markets Authorities and many more. She is an Advisory Board member At the British University in Dubai – Faculty of Business and Law, and a member in the Entrepreneur Comittee at the Capital Club Dubai.

Image Credit: Supplied

She has more than 19 years’ of success helping Regulators, Governments, Boards and high-profile organizations pave their Governance, Compliance, CSR , Financial and Cybercrimes mitigation roadmaps. She is an International speaker, thought leader, trainer and author of many articles , interviews , research papers ( published by Boston & Cambridge Universities) & events across the globe . Nine years prior to establishing her own firm in 2018, Hala led two senior roles at Thomson Reuters , the Market Development for Financial Crimes business across Emerging Markets globally & The Advisory and Educational Governance Risk and compliance Business across EMEA & Asia. Prior to this, Hala was the TSME – DIFC Compliance Consultant – Authorised by Dubai Financial Services Authority, before that Hala was the Head of the Anti-Financial crimes at BLOM Bank France , and prior to that legal Consultant at Raja Bou Alwan Law firm & IP compliance Officer at United Nations -UNDP . To know more, please visit Halaboualwan