Why it is crucial to identify beneficial owners – Verify the representatives of a company before doing business
Knowing who you are actually doing business with is a fundamental part of a sound and secure business relationship. In an era where financial crime, money laundering, and corruption pose constant threats to companies and organisations, it is more important than ever to identify beneficial owners (BO) —the individuals who ultimately control or own a company.
Many businesses focus on assessing their business partners at the organisational level but fail to examine the individuals who truly wield influence behind the scenes. Identifying and verifying BOs is a critical aspect of the due diligence process, helping companies mitigate risks associated with unscrupulous actors.
What is a beneficial owner?
A beneficial owner is the person or persons who ultimately own or control a company, either through direct ownership (at least 25% of shares) or indirect influence, for example, via other companies or through proxies.
In some cases, there may not be a clearly identifiable beneficial owner, such as in large publicly traded companies. If a BO cannot be determined, it is necessary to identify an alternative beneficial owner—typically a person who has influence over the company’s operations, either through ownership or control, but without meeting the required shareholding threshold to be classified as a BO.
Why verifying beneficial owners is essential
1. Compliance with laws and regulations
Businesses in industries such as finance, law, and real estate are required to comply with anti-money laundering (AML) regulations and must have a process in place to identify BOs. Failure to meet these requirements can result in substantial fines and legal consequences.
2. Reducing the risk of money laundering and financial crime
By identifying BOs, companies can minimise the risk of inadvertently engaging with individuals involved in tax evasion, fraud, or money laundering. Many fraudulent schemes operate through complex corporate structures designed to obscure the true owners.
3. Protecting your company’s reputation and avoiding business risks
Unknowingly doing business with individuals linked to criminal activity or sanctioned entities can damage a company’s brand and credibility. A transparent due diligence process that includes BO verification is a key component of building trust with customers, investors, and business partners.
4. Enhanced transparency and better business decisions
Having complete information about who truly controls a company makes it easier to make informed business decisions. It also helps assess whether a business partner has long-term and legitimate intentions.
5. Avoiding links to sanctioned individuals or high-risk countries
With more countries imposing sanctions on individuals and companies, it is crucial for businesses to identify connections to high-risk persons or organisations on sanctions lists. Unknowingly violating sanctions can have severe consequences.
Discover Roaring’s Beneficial Owner verification solutions
Roaring provides tailored solutions for businesses looking to streamline their compliance processes. Learn more about our services for verifying beneficial owners and alternative beneficial owners.
