In a global economy, one of the most important concerns for financial companies is how to track each transaction to mitigate risks of fraud, tax evasion, etc. In the case of transactions ordered by companies rather than individuals, the complexity is even greater, and this is where KYB processes play an important role.

In order to comply with legal regulations, financial companies require extensive data before they start providing a service to their clients. This time we will focus on just one specific piece of information requested in B2B onboardings with compliance: the Ultimate Beneficial Ownership of the company. Let’s learnwhat this concept is and how to address it.

Who is the Ultimate Beneficial Owner (UBO) of a company?

Normally shortened as UBO or simply BO, the Ultimate Beneficial Owner is the person or group of persons who own or control a company. The concept, promoted by different organizations like the FATF, is used in many contexts related to due diligences to prevent money laundering (AML) or terrorist financing (CTF).

Every country regulates which types of companies have to validate and report the UBO of their clients and who is considered a UBO. Even so, the most common case is a person or a business entity that holds more than 25% of the shares and/or voting rights in a company. If you are interested in more detailed examples of different territories, here you have a PWC report on what is considered legally UBO in some European countries.

What information is needed from beneficial owners?

For business entities determined as Ultimate Beneficial Owners, these are the most common required fields in the UBO forms: 

• Business name.
• Percentage of ownership.
• Address.
• Tax ID number.

On the other hand, any individual considered as a UBO must pass a KYC procedure with at least these fields: 

• Full name.
• Date of birth.
• Address.
• Identification number (or similar).
• Percentage of ownership.

Moreover, further documentation may be requested depending on local legislation: 

• Residency status.
• Proof of address.
• Proof of origin of funds.

To verify this information, users may be asked to go through a verification platform like Passbase, Onfido and Veriff (i.e.: to upload a copy of their ID card or passport). If you are interested in learning more, we talked about the most common KYC documents required in fintech onboardings. 

Two approaches to design a UBO step in an onboarding form

Let’s imagine we are designing an onboarding form for a fintech company that offers loans to other companies. After identifying the main information about the company, we would have to ask about who the owners are. 

In our client flows we’ve identified 2 main ways to build this step of the B2B onboarding forms:

1. One user fills everything

The easiest approach, and at the same time the best one if the user filling out the form is the only beneficiary. Note that for companies with multiple beneficial owners, the trade-off is that the user will most likely not have all the required information close by.

Our recommendation for this situation is to save the information each time a step is completed or every time a key person is added. This way, if the users leave the process to collect all the required information from the rest of beneficial owners, when they return to the form, it won’t be necessary to complete all the previous steps again. 

This is how Veem does it, and the next image is taken from their UBO step: 

2. Verification one to one by mail

The best solution in cases with multiple UBO. To describe it, let’s use the Mercury example (see the next image). There are two available options: “Edit Form Yourself” and “Share Form”. By sharing the form, the beneficial owners will receive an email with a link to fill in the required KYC data themselves.

This solution seems more complex to build, but in terms of convenience and efficiency for the client it’s quite interesting.

Overview

In the context of building a KYB flow, getting the ownership information of a company is one of the most important steps, not only to minimize risks, but also to provide users with a great experience in a process that requires effort from the client.

This image shows how we built a simple UBO as part of a KYB flow with Arengu in a few clicks. If you want to easily create your own and integrate it with your API or other 3rd party, we think you would like to try Arengu.