Dubai: In the past few years the number of reports featuring indications of financial frauds has increased dramatically, and countering such frauds has become top priorities for regulators in recent years. Fraudulent parties use off-shore accounts to mask their activity and investigators regularly trace suspicious transactions to fictional addresses or the private homes of unsuspecting residents.
While the exact specifications vary depending on the jurisdiction and fraud regulation standards, companies must supply full and up-to-date information that includes the firm’s registration number, name, address, official status and the names of top management employees for verification of legitimacy and accuracy – to avoid falling under the regulatory purview of suspicious activity.
UBO norms helps counter fraud
With an industry-wide clampdown for banks and corporations to know who they do business with, this is why firms or lenders now go through UBO or ‘Ultimate Beneficial Owner’ checks or disclose their UBO identity for any of their business transactions, failure to do so resulting in steep fines.
If no one meets the condition above, then any natural person who has the power to control the company using any other means may be termed as the UBO. In cases where UBO cannot be identified through the two conditions above, then a natural person who holds the highest management position in the company may be deemed as the UBO.
UBO regulations in the UAE
In the UAE, the government late last year replaced a resolution relating to disclosure guidelines for any Ultimate Beneficial Owner, which covers the most updated requirements for entities in UAE to disclose its beneficial owners, intended to enhance transparency of the UAE registered entities.
On the other hand, there are entities which are exempted with this resolution. They are as follows: the companies in financial free zones like Abu Dhabi Gold Markets and Dubai International Financial Centre, and the companies which are directly or indirectly owned by the Federal or Emirate Government. Entities will need to assess who constitutes a UBO.
The UAE Cabinet passed a resolution last year, compulsorily seeking all firms to keep in their main offices registers on partners or shareholders, stating the information about the ownership interests and voting rights held by each individual.
Businesses are also asked to keep similar register on the top shareholder or main investor (25 per cent stake or more) of the company, while providing the relevant reason behind being majority owners of the company and directors, and date since they become one. Similarly, similar registers are to be kept for all other director of the company and nominated members, if any.
Moreover, all business owners are also required to provide a contact details of an individual, who is compulsorily a resident in the UAE, with whom the authority can contact regarding any clarification on the information provided. If entities failed to comply with the Resolution, the UAE Ministry of Economy possibly enforce sanctions on those entities. The list of administrative sanctions is yet to be issued.
How to comply?
You can submit ultimate beneficial owner data in 3 simple steps:
1. Creating a register of their ultimate beneficial owner data and maintaining the same within their documents, so that this register is treated like the memorandum of association, internal regulations and the rest of the main documents of the establishment. Accordingly, the aforementioned register shall be exhibited upon the request of concerned entities and individuals. In this respect, licensing authorities have provided forms stating all the details and information to be listed in the Ultimate Beneficial Owner Register, and these forms are available on the concerned authorities’ official websites as well.
2. Submission of an undertaking to create the registry and ensure the accuracy of its data to the licensing authority to which each establishment is answerable to. This step gives the opportunity for establishments with complex structures to start the procedures for determining their ultimate beneficial owner and keep them in the addresses registered with the licensing authority and submit their data to the competent authorities. This undertaking is submitted online through the official websites of the respective licensing authority.
3. Entering the ultimate beneficial owner data in the systems of licensing authorities through dedicated web pages on their official websites. Therefore, every establishment should constantly check the official website of its licensing authority and communicate with it in this regard as soon as possible, to avoid penalties.
The campaign as part of efforts to raise more awareness in this regard continued till the end of June 2021.
Following this, starting from July 8, 2021, which is today, the penalties stipulated on the Administrative Penalties Against Violating ultimate beneficial owner procedures have come into effect.
These include the issuance of written warnings up to imposing Dh100,000 in fines in the event of recurrence and continued noncompliance, along with additional administrative penalties, including, among others, license suspension for one year, and restrictions on board of directors’ authority.
The MoE, in cooperation with the concerned licensing authorities in the country, announced that it has already begun implementing the first phase of administrative penalties, including written warnings to non-compliant establishments from July 1, 2021.