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UBO Reporting: A Critical Compliance Task for International Entities

UBO Reporting: A Critical Compliance Task for International Entities

An ultimate beneficial owner (UBO) is generally described as an individual who has significant control or influence over a business. Typically, these individuals can benefit from their association with the company, even if they are not a formal owner of the business. In most countries around the world, the threshold to be considered a UBO is holding at least a 25% ownership stake in a company and/or have significant influence.

Companies are responsible for reporting UBOs to the appropriate registrar in the jurisdiction in which their entity is registered and provide updates on changes to ownership structures when they occur. A failure to provide this information may result in penalties for non-compliance and in some cases in criminal charges.

This article explores the importance of UBO reporting, requirements across different countries, and best practices for ensuring ongoing compliance.

What’s the Purpose of UBO Reporting?

UBO reporting is required in order to comply with global regulations against money-laundering, terrorism financing, and combating other financial crimes such as fraud, bribery, and insider dealings. Ultimately, it is a tool used to ensure transparency in business.

International UBO Disclosure and Reporting Requirements

UBO reporting requirements vary from country to country and are constantly being updated. Below are general UBO guidelines from a few jurisdictions around the world.

  • In the European Union, the 4th AML directive defines a UBO as an individual with ownership or control of 25% or more of a company’s shares or voting rights. If no one qualifies, then the status is extended to senior executives. Any changes to UBO status must be reported to the individual country registrar in which the entity is located within 30 days. EU member states can fine each director up to 5,000 euros for a failure to comply with accurate UBO reporting. While traditionally, UBO details have only been accessible by those within a company, by governmental agencies or by special authorizations, a 5th AML directive requires that company UBO registers from each member state are publicly accessible. In this sense, the EU is leading the way in ensuring transparency in business by making this information widely available.
  • The United Kingdom refers to beneficial owners as Persons with Significant Control (PSC) and generally defines them as individuals and entities who hold 25% or more of the shares of a company, or of the voting rights, and/or can exercise significant influence including the right to appoint or remove the majority of the board of directors. The country has central registers of beneficial ownership for three different types of assets: companies, properties and land, and trusts. These registers are publicly available, except for trusts, and are said to be the first registers made public in the world.
  • In Australia, only entities that provide certain designated services are required to enroll with the AUSTRAC and register any individual who controls or owns 25% of the company.
  • Mexican companies consider UBOs or “Controlling Beneficiaries" those individuals who own at least 50% of shares or voting rights. These individuals must be reported to the Public Registry of Commerce.
  • In India, a UBO is known as a Significant Beneficial Owner (SBO) and includes any entity or individual (regardless of residency) that holds at least a 10% interest in a company. Companies must file an SBO declaration and update the government registrar. Any changes in status must be reported within 30 days.
  • The Panamanian government is currently in the process of passing regulations on beneficial owners and launching an official register. The bill will require legal entities to report on UBOs who have a 25% ownership stake in a company unless the company’s shares are listed on a public exchange. Changes will need to be reported within 30 days.

UBO Compliance Best Practices

For businesses operating around the world, it’s important to comply with UBO reporting. The following are best practices for ensuring ongoing compliance wherever you do business:

  • Analyze corporate structures: Include shareholders, subsidiaries, and sister companies within the organization.
  • Identify beneficial owners: Confirming which individuals fall within the threshold of beneficial owners in the jurisdiction.
  • Update registers: Keeping the appropriate government agencies and local registers updated with the most accurate information when it becomes available or when there are any changes.
  • Schedule ongoing reviews: Regularly schedule UBO reviews (once or twice a year is recommended) and add this as part of your compliance tasks. This helps to account for any changes at the parent company or if there has been a restructuring or changes to the UBO structure. It also ensures that updates are reported to the local registry in due time.
  • Keep records: This information can be used as a baseline comparison in the event of any UBO changes.

Conclusion

When establishing an entity in a new country or in multiple countries, reporting accurate beneficial ownership information is critical to establishing good standing and complying with local regulations that aim to combat corruption and financial crimes. More importantly, it demonstrates your organization’s commitment to transparency in business. Understanding local requirements in every country you do business in will safeguard your entity from potential penalties and charges for non-compliance and reputational damage that hinder growth.

CT’s global experts have the local know-how to help keep your entity compliant wherever you operate. To learn more about how CT’s Global Corporate Services can help address your compliance needs across the world through one central point of contact in the U.S., contact a CT representative at (855) 444-5358 (toll-free U.S.).

 

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