In a world that is becoming highly connected and intricate, it is becoming more and more important to understand where the power lies in structures and organisations.
A recent post by PassFort detailed why it is vital to understand corporate structures and identify the ultimate beneficial owners (UBOs) – someone who ultimately owns or manages a company and benefits from its transactions – to guard you from geopolitical risk.
In an increasingly chaotic global atmosphere with geopolitical tensions running high, many companies across the globe are needing to respond to changing events. However, as PassFort underlines, you can only do so if you enhance due diligence on your customer base and supply chain.
In addition, it is key to review sanctions lists and watchlists daily in order to check who is exposed to political risk. A failure to comply with such sanctions could result in fines and heavy reputational damage. To comply with sanctions and laws on money laundering, bribery and corruption – it is vital to know the UBOs of your customers and suppliers.
PassFort said, “Knowledge of the UBOs in your business network can help you keep up when regulatory changes more quickly. Sanctions have developed at a fast pace since Russia’s invasion of Ukraine in February, and you must have a grip on corporate structures to comply with the latest rules.”
In order to identify UBOs, PassFort recommends using sources of data from a range of jurisdictions. This is because corporate structures can be complex and UBOs may hide themselves, in addition, data collection can be onerous, especially if done the manual way. Doing it the automated way can help save time and money and ensure you remain compliant.
If it is hard to see the structure of a company, this means you could be exposing your organisation to risk, PassFort detailed. The firm added, “Under normal circumstances, KYC best practices mitigate the risk of activities such as money laundering. In times of military conflict, you need to go further and understand your exposure to risk related to politically exposed persons and those on sanctions lists.”
The simpler a structure, the easier it should be find its UBOs. When assessing a company’s risk, PassFort suggested asking a number of questions. These include questions such as does it make more money than you would expect? Is it registered in an opaque jurisdiction? Is it on a list of unregistered firms? Does it present a geopolitical risk? Does it operate in an area that could present a risk in the future?
The firm concluded, “The answers will help you assess the broader risk of a company and decide whether to continue the relationship. If you are operating or plan to operate in volatile areas, a knowledge of UBOs and corporate structures will help you mitigate risk and future-proof your organisation.”
Find the full post here.
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