The strategy to deliver a robust UBO Compliance Process

The strategy to deliver a robust UBO Compliance Process

On September 7, 2017, Pakistan-based Habib Bank was slapped with a US $225 million fine and its New York City branch was shut down by the New York Department of Financial Services for AML non-compliance. On the face of ever increasing terror attacks, money laundering (which is a major contributor to funding such attacks) is a growing concern and this leads to the importance of banks and FIs taking their UBO (Ultimate Beneficial Ownership) Compliance Regulations with utmost seriousness. The UK too has come under frequent terrorist attacks apart from facing other financial crimes, and KYC/AML compliance with specific focus on UBO requirements are becoming stringent. Globally, cases such as Panama Papers, Unaoil and VimpelCom reiterate this need for deep, complex, thorough customer due diligence. 

Around the world, different initiatives taken by regulators, banks and financial institutions aim to counter this issue of illicit financial transactions on a war footing. The G20 Nations are working in right earnest to increase corporate transparency and bring to light anonymous and secretive shell companies. The longstanding aim of global groups such as the G7, World Bank, International Monetary Fund and the Financial Action Task Force (FATF) is to determine the real owners of companies by deconstructing complex company structures. Central to the fourth Anti-Money Laundering Directive (AMLD IV), EU has mandated that each state creates a UBO register for greater transparency of company ownership.

But, contrary to popular belief, identifying the ultimate beneficiary of an account, especially one masked through a complex web is not easy. Specifically, there are nine key challenges that banks and FIs have to deal with:

1.     Corporate transparency is severely hampered by fragmented and inconsistent data held in national registers around the globe.

2.     Entering into a contract or business relationship with a company without full knowledge of beneficial ownership, past or present, introduces significant risk to an organization.

3.     Educating staff on how to report a compliance breach is extremely challenging.

4.     Banks and FIs often partner with online aggregators and client acquisition consulting firms, but these partners pass on the onus of AML due diligence back to the banks. Needless to say, this adds an additional process layer for the KYC team on new clients acquired through digital channels.  

5.     As a result, only about eight per cent of firms screen their entire client base rigorously and in an ongoing manner.

6.     Sanctions lists getting updated periodically also can change the risk profile of the clients, thus compounding the challenges.

7.     This leads to reactive, document-centric and manual processes that cannot help actively manage risk and compliance.

8.     Data silos also hinder detecting beneficiary exposure and it is crucial to use technology to link data and information stored in different repositories.

9.     This leads to a butterfly effect, increasing risks around relationship building

At a broader level, not only internal business systems need to be integrated, but they also need to be synchronized with external databases, to conduct thorough due diligence that goes beyond regulatory mandates. 

External data resources could range from:

·      Company Website

·      Corporate Registries

·      EDGAR For Publicly Traded Companies and their Subsidiaries

·      Form ADV(for investment advisers only)

·      Search Engines

To overcome this challenge, organizations need a robust framework to manage risk and compliance and that is where a strong KYC partner with proven capabilities comes to the fore. Automating data collection, storage and integration for easy access to information is one key element to making UBO due diligence faster and more reliable. This can provide a holistic view and situational awareness of relationships. A clear, structured design of data sets that is well-labeled for ease of use, flow, processing, and reporting are critical for this automation to work. Application Programming Interfaces (APIs) within the system can help integrate workflow and content management, enabling faster onboarding and a robust due diligence process.

While technological solutions can help overcome time, quality and integrity issues, an experienced partner with analytical capabilities can help strengthen processes and effectiveness of data collection, integration, analysis as well as ongoing monitoring.

At Cenza Technologies, we’ve developed deep capabilities on the entire KYC/AML Process with a specific focus on UBO Compliance and Regulation. The key here revolves around developing a tight process keeping in mind the nine challenges listed above. Often, the biggest challenge around UBO will result from data stored in silos, not connected with each other and the KYC Compliance Process Partner will have a methodology to prevent this common area of concern. Additionally, the ability to stay nimble and agile even as customer risk profiles change dynamically, thanks to inconsistent data, is a critical capability for a KYC Services Partner and we’re proud to say Cenza displays these capabilities, through its years of experience.

At Cenza, we constantly upgrade our KYC Process to include the latest of technologies to serve our customers, including a dynamic approach to upgrading our UBO compliance framework. With customer-centricity and cutting edge technology, we’re able to run a robust UBO discovery process for banks and financial institutions that we believe is amongst the best in the world. Do reach out to us to know more.


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