What is a UBO?
Ultimate beneficial owner (UBO) is a legal term for the person that owns or controls a legal entity, such as a ship. This person is the one that ultimately profits from each transaction, even if they aren’t documented as the legal owner.
It isn’t always easy to determine who the ultimate beneficial owners are. There are different rules and regulations regarding disclosing this information. Since they aren’t necessarily documented, people can hide within a complex ownership structure or conceal their identities completely, making it difficult for legitimate businesses to fully know who owns the vessel they are engaging with.
Why is it important to know the UBO?
- Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT): knowing the identities of UBOs helps the company conduct the necessary maritime due diligence, assess the customer’s risk profile, and monitor any suspicious transactions.
- Sanctions and embargoes compliance: identifying and verifying UBOs is an essential part of sanctions screening and staying one step ahead of compliance risk. It allows one to verify that vessels, businesses, cargo, or trusts are not owned or controlled by individuals or entities that are subject to sanctions or embargoes.
- Reputation protection: the reputation of the companies, trusts, or vessels can be damaged if they are found to be associated with UBOs who have been involved in financial crimes or controversies. Knowing the UBO enables the company to take proactive steps to protect their reputation.
How to identify ultimate beneficial owners in the shipping industry
There can be a number of challenges in determining the ultimate beneficial owner , such as:
- Complex ownership structures: many companies have complex ownership structures with multiple layers of ownership and control. This makes it difficult to determine the ultimate beneficial owner, as the ownership may be spread out among many individuals or entities.
- Hidden ownership: some people try to conceal their ownership or control of a legal entity through the use of nominee shareholders, trusts, or other methods. This can make it difficult to locate the ultimate beneficial owner, as the true owner may be hidden behind a web of intermediaries.
- Lack of transparency: in some jurisdictions, public records and other information about legal entities and their owners may be difficult to access. This can make it difficult to determine the UBO, as the necessary information may not be readily available.
AI technology can run a deep background check to mitigate the risk. Part of this background check includes a detailed rundown of the complete beneficiaries list, which includes the UBO, as well the ownership structure of the shipping vessel, behavioral analytics of deceptive shipping practices, and sanctions screening.
To determine the UBO, the AI scan collects detailed ownership data from a variety of sources. The current and historical data has access to over 120,000 vessels and 100,000 companies, and detailed information on the seven levels of ownership:
- ISM Manager
- Technical Manager
- Commercial Controller
- Commercial Manager
- Registered Owner
- Ultimate Beneficial Owner
The data is double-checked for accuracy against multiple sources and assessed by an advanced algorithm. In cases where there is conflicting data, the AI model runs a multi source comparison to determine the validity of each of the data sources.
UBO forms and UBO declarations
In addition to using technology to determine the UBO, there are UBO forms and UBO declarations that are used to collect information about ships. These are both part of the process of identifying and verifying UBOs, and in many cases, it’s required for legal entities to submit them to the relevant authorities.
- UBO form: the form typically includes questions about the identity of the UBO, including their name, address, date of birth, and other relevant information. Some forms may also include questions about the UBO’s relationship to the ship, such as their level of ownership or control.
- UBO declaration: a signed document by the UBO that confirms the accuracy of the information provided on the UBO form. The declaration serves as an affirmation that the information provided is true and accurate to the best of their knowledge.
While there are no global regulations for declaring the ultimate beneficial owner, many countries require shipping companies to disclose information about their UBOs to the relevant authorities. The UBO form and declaration are used to collect and verify this information. They must be updated periodically to ensure the enclosed information is still accurate.
The UBO form and declaration are also important tools for financial institutions that help finance purchases to comply with AML and CFT regulations. These forms and declarations are used to identify and verify the UBOs of their customers and maintain accurate records of their information.