The document discusses the importance of understanding ultimate beneficial owners (UBOs) in the context of anti-money laundering and counter fraud legislation implemented by the UAE government through cabinet resolution no. 58 of 2020. It defines a UBO as an individual who owns or controls 25% or more of an entity and outlines steps for identifying UBOs, including obtaining entity details, researching ownership chains, and conducting AML/KYC checks. The document also categorizes UBOs by risk level, detailing the measures required for low-risk individuals versus those deemed medium to high-risk.

1. Getting to know your UBOs
https://farahatco.com/blog/getting-to-know-your-ubos/

2. Int.
• Unregulated entities are a key concern in respect of economic and financial crimes and many
criminal enterprises utilize commercial institutions to commit such crime. It is for this reason that
many governments are seeking to strengthen and enhance their existing Anti-money laundering
and counter fraud legislation.
• To this end, the UAE government issued Cabinet Resolution No. 58 of 2020 on Regulating
Beneficial Owner Procedures (the Resolution) in August 2020, which requires all companies which
are licensed to do business in the UAE, unless exempted by the Resolution, to maintain both a
detailed register of Partners/Shareholders and a register of Real Beneficiaries.
• However, this is not news to anyone and companies are obliged to know their clients in order to
root out connections with criminal or unsanctioned parties.
• But what is a UBO (Ultimate Beneficial Owner) and why is transparency necessary when dealing
with such people or entities? And how do you protect yourself and your company from falling foul
of this complicated legislation?

3. What is a UBO?
• A UBO is an individual who ultimately owns or controls 25% or more
of an entity (whether directly as a shareholder or indirectly via control
of companies) or other entities or structures that control the entity. In
short, it is the ultimate beneficiary regardless of the chain of control.

4. The following is a non-exhaustive list of examples of UBO
relationships which can be identified in practice:
• Legal Person – Ownership, i.e., this is where the UBO is identified as the ultimate
owner of the entity in question.
• Legal Person – Senior Managing Official i.e., this is where the UBO is identified as
a Senior Managing Official of the entity.
• Legal Arrangement – Trust – Settlor i.e., this is where the UBO is identified as the
Settlor, Grantor or Donor of a trust which owns or controls the entity.
• Legal Arrangement – Trust – Trustee i.e., this is where the UBO is identified as the
Trustee of a trust which owns or controls the entity.
• Legal Arrangement – Trust – Protector i.e., this is where the UBO is identified as
the Protector of a trust which owns or controls the entity. Note – The main
difference between the Protector of trust and a Trustee is that assets of the trust
vest in the Trustee, whereas this is not the case with a Protector.
• Legal Arrangement – Trust – Beneficiary i.e., this is where the UBO is identified as
the beneficiary of a trust which owns or controls the entity.

5. Steps used to check for a UBO
• First step: Obtain the entity’s details and credentials
• To verify their legitimacy and the accuracy of their records, entities must provide full and up-to-
date information regarding their registration/ license number, name, address, legal status, and
executive management. The details and information required may differ depending on the
country or jurisdiction.
• Second step: Research and clarify the chain of ownership
• Identify natural or legal persons who hold in shares or any other interest in the entity and
determine whether it is a direct or indirect relationship.
• Third step: Identify the UBO
• Determine and identify the total percentage of shares, management control, and ownership stake
of every individual. Utilize this information to calculate whether any such person meets the
definition of a UBO as per the relevant legislation.
• Fourth step: Perform an AML/KYC check
• All those identified UBOs should then undergo a comprehensive AML (Anti-Money Laundering)/
KYC (Know Your Client) assessment.

6. Risk Categories of UBOs
• A UBO’s risk category will determine the correct approach:
Low risk
• In respect of Low-Risk UBOs, it will mostly be sufficient to simply request
the relevant individual to provide evidence of their identity and to sign a
statement confirming such details. The standard visual check (by
comparing the presented ID document’s photograph with the actual facial
features of the individual in question) and authentication check (by
verifying the presented ID document’s authenticity) will generally be
adequate in low-risk cases.
Medium to High risk
• If the individual in question if a Politically Exposed Person (PEP) or there
are concerns of terrorism or money laundering, then further investigation
will be the most appropriate action.

7. In this regard, the Financial Action Task Force
recommendations include the following:
• Conducting of additional in-depth searches to collect information and data
from a wider variety of sources to assess the individual’s risk profile.
Factors such as political exposure, negative reports in the media and being
the subject of legal or regulatory enforcement may contribute adversely to
the risk;
• Investigating the source of funds involved in the transaction to ensure that
that they are not the proceeds of a crime and to document whether there
are discrepancies between the income, the source of wealth, and the
overall net worth of the individual in question;
• Obtaining additional information and detail from the customer regarding
the nature of the business relationship or transaction;
• Requesting existing clients to annually provide updated information about
significant amendments in respect of ownership.

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