What is an Ultimate Beneficial Owner (UBO)

UBO Meaning and Definition

What does UBO stand for?

UBO (ultimate beneficial owner) refers to the ultimate beneficial owner, who actually controls and benefits from a company. The short answer to “what is UBO” or “what is an ultimate beneficial owner” is the true owner of the business, even if the shares are registered to another person or company.

UBO vs. Beneficial Owner – is there a difference?

A beneficial owner is any owner who has an economic benefit. The ultimate beneficial owner is the company owner (usually, a natural person) who ultimately owns or controls the business, either directly or through a chain of other entities or individuals. The difference is that every UBO is a beneficial owner, but not every beneficial owner is a UBO.

Why UBO Matters in Banking and Compliance

UBO in banking explained

UBO in banking means that the bank identifies the ultimate owner as one while opening a corporate account or providing banking services. This helps to understand who actually controls the company and excludes working with shell structures.

Role of UBO information for AML and KYC checks

UBO information is key for AML and KYC/KYB checks. This check allows banks to verify the origin of funds, analyze short and long-term risks, and identify possible money laundering activity or financing of terrorism and connections with sanctioned entities/individuals.In addition, UBO analysis helps to identify hidden risks. For example, a sanctioned company, such as one from Russia or Belarus, may formally indicate a nominal owner, but the real ultimate beneficial owner controls several other related structures. If the same person turns out to be a beneficiary in different companies, banks may be able to see the full picture and stop attempts to circumvent sanctions.

Types of Beneficial Owners

Direct vs. Indirect ownership

There are two types of beneficial owners: direct and indirect. Direct ownership means that a person owns a stake in a company directly. Indirect ownership occurs when control is exercised through other companies, trusts, or nominee shareholders.

Legal entities and natural persons as UBOs

The UBO definition usually assumes a natural person. However, in certain cases, the ultimate owner may be a legal entity or even a state. It is important to determine who actually makes decisions and controls the business.

UBO Register and Reporting Requirements

What is a UBO register?

A UBO register is a database, usually state-owned, that stores information about the ultimate beneficial owners of companies. This database has already been implemented in many countries. It is designed to provide transparency, store UBO information, and show what type of beneficial owner is behind the business.

Who needs to provide UBO information?

Depending on the specific jurisdiction, companies may be required to provide UBO data during the registration process, opening bank accounts, or obtaining licenses. In most countries, this is a mandatory requirement to determine who the UBO is in the ownership structure. At the same time, in classic offshore jurisdictions, there is little to no requirement(s) to disclose the ultimate beneficial owner, which reduces the transparency of such companies.

How to Identify an Ultimate Beneficial Owner

Step-by-step process

To determine who the ultimate beneficial owner is, you need to:

1. Review the statutory documents and shareholder registers.

2. Identify individuals who directly or indirectly hold more than 25% of the shares or control more than 25% of its voting rights.

3. If the owners are not identified, identify individuals who exercise actual control.

4. Receive UBO information as confirmation through documents or official registers.

In practice, additional methods may also be applied, such as verification of natural persons via professional networks (e.g., LinkedIn), submitting requests to competent authorities where data is available upon request only, analyzing corporate connections, or using OSINT investigations to gather supporting evidence.

Common challenges and mistakes

The main difficulties in identifying UBO arise from the complex international corporate structures, as well as the use of trusts, funds, and nominee owners. Another problem is outdated UBO information: the beneficiary may change, or their personal data may be updated. This makes it difficult to establish who actually owns or controls the company. Your main mistake is if you focus only on direct shareholders and ignore indirect ownership. Please note that when working with companies, it is important not only to understand what UBO stands for, but also to correctly apply the rules for identifying the ultimate beneficial owner.

Practical Examples of UBO in Business

UBO in corporate structures

In corporate structures, UBO can be hidden behind several levels of ownership by companies. For example, shares are owned by foreign legal entities, but the beneficial owner is an individual who controls the business. Such a scheme complicates verification and requires detailed analysis.

UBO in financial institutions

In financial institutions, UBO identification is also crucial. Banks, investment funds, and insurance companies are required to provide a UBO verification when opening accounts or sometimes concluding transactions. This allows them to comply with AML and KYC/KYB requirements, identify risky customers, prevent terrorist financing, and avoid sanctions violations.

FAQ

What is a UBO in simple terms?

UBO meaning — the natural person who ultimately controls a company and benefits from it.

What does UBO stand for in banking?

This means full identification of the ultimate beneficial owner for KYC/KYB and AML checks.

Is UBO the same as a shareholder?

A shareholder is the owner of shares, and a UBO is the natural person (rarely, a legal person) who actually owns or controls the particular entity. Not every shareholder is the ultimate beneficiary.

What is a UBO register?

UBO register is an official database that stores information about ultimate beneficial owners, generally operated by the government agency of a particular country.

Who needs to declare UBO information?

All companies are normally required to provide such information when registering, opening an account, initiating a transaction, or obtaining permits to conduct specific business activity.

In addition, UBO information may need to be declared during audits, compliance checks, certifications, applying for business loans, grants, and other official procedures where ownership transparency is required.