The UBO, a very important term in compliance parlance is in the limelight. The US Congress recently included certain AML provisions in the NDA Act of 2021 which was passed into law on 2021 January 1st. This was an override by the US Congress on President Trump’s veto on the Act.
The provisions include:
- Strengthening Treasury Financial Intelligence, Anti-Money Laundering, and Countering the Financing of Terrorism Programs.
- Updating BSA program requirements, including suspicious activity reports (SARs) and currency activity reports (CTRs) reporting requirements and usage by law enforcement. Establishes a Sub-committee of Innovation and Technology
- Calls for improved interagency coordination and training. Establishes a Sub-committee on Information Security & Confidentiality, expanded whistleblower protections. Sets additional penalties for repeat offenders.
- Sets reporting requirements on beneficial ownership and establishes a government database.
- Guidelines on financial service matters and other miscellaneous provisions.
Some of the provisions of the Bill are likely to need substantial time for implementation. But guidelines with respect to the provisions on the UBO will be taken up on priority since the bill allows FinCen to issue regulations regarding reporting processes for the companies within one year and a two-year implementation period for existing companies. All companies operating in the United States have to report their Ultimate Beneficial Owners to FinCEN, which will end the incorporation of fully anonymous shell companies.
In UAE, we have the recent Cabinet Decision No. (58) of 2020 Regulating the Beneficial Owner Procedures.
The Resolution requires entities licensed in the UAE (unless exemptions apply) to prepare and file an Ultimate Beneficial Owner (“UBO”) register, Nominee Director register (if applicable), and a Partners or Shareholders register, with the relevant authority within sixty (60) days from the date the Resolution came into effect, being 27 October 2020, or by the date, the entity is established.
The Resolution applies to all entities licensed in the UAE, excluding the Entities in financial free zones (Abu Dhabi Global Markets and Dubai International Financial Centre)& Entities that are directly or indirectly wholly-owned by the Federal or Emirate government.
Article 5 of the resolution also gives a very clear definition of the Beneficial Owner:
- For the purposes of implementing the provisions of this Decision, the Beneficial Owner of the Legal Person shall be whoever person that ultimately owns or controls, whether directly through a chain of ownership by other means of control such as the right to appoint or dismiss the majority of its Directors, 25% or more of the shares or 25% or more of the voting rights in the Legal Person.
- The Beneficial Owner may be traced through any number of Legal Persons or arrangements of whatsoever kind.
- If two or more natural persons jointly own or control a ratio of capital in the Legal Person, all of them shall be deemed as jointly owners or controllers of such ratio .
- If, after all reasonable means have been taken, no natural person is identified as an ultimate Beneficial Owner in accordance with Clause (1) of this Article, or there is reasonable doubt that any natural person identified as an ultimate Beneficial Owner is the true Beneficial Owner in the Legal Person; then the natural person who controls the Legal Person by other means of control shall be deemed as the Beneficial Owner.
- Where no natural person is identified in accordance with Clause (4) of this Article; then the natural person who holds the position of a higher management official shall be deemed as the Beneficial Owner.
Anti-money laundering (AML) continues to be one of the most complex and critical components of financial compliance risk management. Identification of UBO plays a critical part in managing the compliance risk. The Regulators and Governments are taking proactive steps for the identification of that, and it is for the financial institutions to move ahead and utilize the opportunity.
