Ultimate Beneficial Ownership (UBO)

The alarming rise in financial crimes, both external (e.g., money laundering, terrorist financing) as well as internal (e.g., tax evasion, corporate fraud), has necessitated that regulatory authorities tighten their grip on ownership transparency. As financial networks grow in complexity, anonymous ownership structures have become safe havens for criminal organizations and corrupt individuals. 

To counter these threats, regulators around the world have begun to enforce more stringent Ultimate Beneficial Ownership (UBO) disclosure rules. These efforts look to increase transparency, enhance corporate accountability, and facilitate smoother information sharing between watchdogs and corporate entities. The end goal is to facilitate a more secure and compliant financial ecosystem that is equipped to identify and deter criminal activity.

Who is the Ultimate Beneficial Owner?

An Ultimate Beneficial Owner (UBO) is the, or one of the, individuals who ultimately owns or controls a business or other legal entity. According to the Financial Action Task Force (FATF), UBOs are natural persons who have a significant stake or influence over a company, whether that be directly, through intermediaries, or at the end of a complex ownership chain.

UBOs can include:

• Individuals who own a significant proportion of shares or voting rights in a company
• Persons who benefit from the income or assets of an entity
• Natural persons who effectively control over a legal arrangement, regardless of formal, stated ownership

UBOs are not always the registered owners of a business which makes identifying them crucial to prevent shell companies and less-than-transparent structures from enabling illicit activities.

Updated UBO Criteria

As outlined by the FATF, the criteria for determining a UBO generally falls into two categories:

(i) Ownership-Based Criteria

A person qualifies as a UBO if they:

• Control at least 25% or more of a company’s shares or voting rights
• Benefit from 25% or of the entity’s assets
• Have a meaningful ownership stake, even if it is held through intermediaries, trusts, or bearer shares

With updates to FinCEN guidelines in the U.S. and the EU’s AMLA proposals, some jurisdictions have lowered this threshold to 10% in high-risk sectors or in politically exposed contexts.

(ii) Control-Based Criteria

 When no individual meets the ownership threshold, a person who exercises effective control is designated as the UBO. This can include:

• Nominee directors, who are appointed to conceal the identity of the actual owner.
• Corporate directors, who supervise the legal entity’s activities on behalf of the stakeholders to influence governance decisions.
• Trustees or protectors, who exert influence through a trust or a legal arrangement.

Additionally, entities that use bearer shares, which are unregistered securities conferring ownership to the holder, are considered high-risk for obscuring UBOs. As of today, bearer shares are either banned or severely restricted in most jurisdictions.

Why are UBO Checks So Critical?

UBO checks are a key component of Know Your Business (KYB), Anti-Money Laundering (AML), and Countering the Financing of Terrorism (CTF) frameworks. These checks are put in place to help financial institutions and corporations:

• Verify that business partners are legitimate and trustworthy.
• Identify and avoid ties to offshore shell companies, tax evasion schemes, and money laundering schemes.
• Fulfill legal obligations and avoid significant penalties or reputational damage.

Now that the EU’s 6MLD and the Corporate Transparency Act (CTA) in the U.S. have gone into full effect, UBO checks are more than just best practice, they’re a legal requirement.

UBO Compliance Obligations in 2025

Who Must Comply?

UBO compliance applies to a wide range of sectors, especially those vulnerable to misuse for criminal financial flows. These include:

• Banks (both commercial & investment
• Insurance and brokerage firms
• Credit unions and fintech platforms
• Money service businesses (MSBs)
• Real estate firms involved in high-value transactions
• Crypto service providers (now included under MiCA and VASP frameworks)
• Legal and corporate service providers

Jurisdictional Requirements

Compliance regulations vary by jurisdiction but in general they require entities to:

• Collect and maintain accurate UBO records.
• Submit UBO details to centralized registers (e.g., EU’s Beneficial Ownership Register).
• Ensure information is up-to-date and accessible to regulators.
• Perform ongoing risk-informed due diligence.

Failure to comply with these can result in:

• Fines, which can add up to millions depending on the jurisdiction.
• Sanctions or restrictions on business operations.
• Reputational damage, especially in highly regulated sectors.

Recent Global Developments

United States

The Corporate Transparency Act came into effect in 2024. Companies are required to report beneficial ownership information to FinCEN through the BOI Reporting Rule and enforcement is active, carrying penalties of up to $500 per day for non-compliance.

European Union

UBO compliance has seen one overhaul with the updated 6AMLD and another set to come with the launch of the EU AML Authority (AMLA) in 2026. Public access to beneficial ownership registers has been restricted but access is still granted to authorities, financial institutions, and regulated professions.

South Africa

In 2024, the Financial Intelligence Center (FIC) lowered the threshold for identifying ownership from 25% to 5% in order to enhance transparency and compliance. Additionally, the South African Revenue Service implemented new disclosure requirements for company’s tax returns, mandating the disclosure of ultimate beneficial ownership.

Asia-Pacific & MENA

Countries like Singapore, UAE, and Saudi Arabia have all adopted or strengthened their existing UBO disclosure frameworks to align with FATF standards, including new digital registries and stricter filing requirements.

Final Thoughts

Global financial systems and their safeguards must grow and evolve together. UBO compliance has emerged as a fundamental requirement for identifying hidden ownership structures that can work to facilitate illicit financial activity. By mandating disclosure and verification of true beneficial owners, regulators are reinforcing financial transparency and closing loopholes exploited by bad actors across sectors and jurisdictions.

With enforcement steadily increasing across regions, from the U.S. and EU to India, South Africa, MENA and beyond, businesses cannot afford to treat UBO checks as optional anymore. Proactive compliance ensures that not only are companies adhering to their legal obligations but that they are establishing trust and strengthening the global fight against financial crime.