UBO

Cabinet Resolution No. (58) of 2020 regulating Beneficial Owner Procedures (the “Resolution”) took effect on August 28, 2020, and replaced Cabinet Resolution No. 34 of 2020 issued earlier. The Resolution covers the most updated requirements for the entities in UAE to disclose their Ultimate Beneficial Owners which intends to enhance the transparency of the UAE registered entities. It also plans to develop effective and sustainable executive and regulatory mechanisms and procedures in respect of beneficial owner data and improve implementation to ensure International Compliance and global confidence

Pursuant to Article (15) of the Cabinet Decision No. (58) of 2020 regulating the beneficial owner procedures which came into effect on 28 August 2020. The Resolution introduces new requirements for entities to disclose their Ultimate Beneficial Owners Details.

Who is the Ultimate Beneficial Owner (UBO)?

A UBO or Ultimate Beneficial Owner is the person or entity that is the ultimate beneficiary when a company initiates a transaction. A UBO of a legal entity is a person who:

  • Holds an interest of a minimum of 25% capital of the legal entity.
  • Has a minimum of 25% voting rights at the general meeting of shareholders.
  • Receives a minimum of 25% of said legal entity’s capital as beneficiary

What is the purpose

The main purpose is to enhance the transparency of entities registered in the UAE, as well as to develop effective and sustainable executive and regulatory mechanisms and procedures in respect of Beneficial Owner Data.

UBO International Standards

The FATF: Financial Action Task Force is an organisation that keeps a tab on global money laundering and terrorist financing activities. It lays down the international standards that aim to prevent illegal financial transactions. Two hundred countries agreed to the rules established by the Financial Task Force for beneficial ownership in 2003 and 2012. The 4th AMLD and CDD rules are applicable, but several countries adhere to the terms laid down in the international treaties that require beneficial ownership declarations. The organisation regularly keeps a vigilant eye on the money laundering and terrorism financing methods and improves its standards to combat the challenges of evolving money laundering techniques.As a result of the FATF study, there has been massive awareness, and legitimate governments are targeting corruption. The emphasis on obtaining information on beneficial ownership due diligence has increased more than ever before, serving many purposes such as increased financial transparency, preventing money laundering, and stopping funding of terrorism and unlawful activities. 

Ultimate Beneficial Owner Step-by-Step Process

You need to follow the unique compliance standards for each country in which the business is operating. But there are a few standard procedures that must be followed to develop an effective UBO program strategically.

1. Obtain the firm's credentials

Complete records of the companies have to be provided, such as company’s names, address, official status, top management employees and verify the records’ accuracy.

2. Identify Ownership Structure and Percentages

It’s crucial to know about the entities who have a stake in the company, directly or indirectly via another party.

3. Identify Beneficial Owners

Identify UBO by determining the entity or natural person’s ownership interest or management control – total percentage of shares, ownership stake, management control, and verify if any of it falls under the ambit of UBO UAE.

4. Perform AML/KYC checks on all persons identified as UBOs.

A proper system must implement all the processes and make it a practical solution. UBO checks can be streamlined, and the process can be made easier for both the compliance and legal entities. Manual data screening delays the onboarding process as it does not facilitate a reliable screening process. Human errors result in re-screening and assessment, causing a delay in starting a business. Moreover, the workforce struggles with data input rather than handling complex compliance issues. 

Ultimate Beneficial Ownership and AML Compliance

Automated solutions are the futuristic way of compliance with the AML/ CFT requirements as they make the detection and validation of UBOs a seamless and quick process. AMLUAE can help you with compliance with the AML/CFT requirements. Contact us to know more about assisting you with AML/CFT compliance.

The main goal of introducing the UBO Rules is to facilitate the proper functioning of the UAE corporate registry. This means that companies must have the necessary information stored on their systems, in order to identify any customer and business partner they are dealing with. This includes collecting data on all possible UBOs and verifying their identities, obtaining a customer risk assessment, setting up enhanced due diligence measures, and making sure that all customer identification details and business documentation are up to date and accurate. This will help the companies adhere to the AML/CTF regulations, source of wealth and source of funds requirements, and other associated regulations, in order for them to operate safely and meet their legal obligations.

In conclusion, it is evident that the UBO Rules in the UAE are essential in order to regulate the financial sector. This is to ensure that any suspicious activity or transactions are prevented, and that companies comply with the regulations and international standards and recommendations. The regulations have been put in place in order to protect the UAE economy and to ensure that companies run ethically and sustainably. It is thus important that companies must be aware of UBO Rules, and must comply with them accordingly.