Identifying the Ultimate Beneficial Owner (UBO) is not merely a regulatory obligation – it is a key tool in preventing financial crimes such as money laundering, terrorist financing, and tax evasion. After reviewing the regulatory framework in a previous article, we now focus on the practical steps: how to identify the UBO, what questions to ask, and what documents to request.

Initial Approach – Asking the Right Questions

Asking the right questions early on ensures a quick and reliable identification of the UBO. Clear and targeted questions help identify the real controlling party and potential risks.

Sample questions for identifying the UBO:

• Who is the ultimate owner of the company holding more than 25% of the shares?
• Are there individuals who control the company without direct ownership?
• Are there agreements that allow another person to exercise control?
• Are there trusts or other opaque ownership structures?

It is important that the questions are tailored to the client’s type and structure. Also, the full ownership and control structure should be examined – not only participants with more than 25% ownership.

What Documents to Request Based on Client Type

The appropriate documentation depends on the client’s structure, jurisdiction, and control mechanisms. To ensure effective UBO identification, the approach should be tailored to the client’s specific profile and structure. Below are the main client categories, the types of documents AML teams typically request, and practical examples.

1. Companies and Corporate Structures

For legal entities (LLCs, joint-stock companies, etc.):

• Current extracts from commercial registries or equivalent authorities;
• Ownership chart showing shareholders and intermediary entities;
• UBO declarations (template or notarized);
• Copy of a valid identity document for the identified UBO;
• Annual financial statements and/or interim reports;
• Meeting minutes reflecting strategic decision-making (if applicable).

Example: A client owns a sole proprietorship in Bulgaria. Required documents: trade register extract, ownership chart, notarized UBO declaration, copy of UBO’s ID/passport.

UBO Thresholds in Different Jurisdictions

Countries vary in their thresholds for defining a UBO. These generally range between 10% and 25%, and companies must be aware of local rules:

• Bulgaria and the EU – 25% or more (direct or indirect);
• USA – 25%, with lower thresholds in specific contexts;
• Canada – 25% base threshold, with possible regional differences;
• India – 10% or more for companies, 15% for trusts;
• Argentina – 20% or more ownership or control.

Note: When a company operates in multiple jurisdictions with different UBO thresholds, best practice is to apply the lowest threshold. This ensures compliance with the strictest standards and demonstrates a commitment to transparency and effective risk management.

2. UBO by Control (Control Without Ownership)

UBO identification isn’t always based on shareholding. In some cases—especially involving complex or offshore structures—a key person may be considered a UBO if they:

• Exercise significant influence through contractual agreements (management agreements, powers of attorney);
• Make all major operational decisions;
• Act as a hidden controlling party.

Example: A CEO of a holding company with no equity interest but with authority to independently manage funds. Required documents: management agreement, meeting minutes, internal UBO declaration, copy of identity document.

3. Trusts and Foundations

These are higher-risk structures and require more in-depth checks. Identifying the UBO requires recognizing:

• The settlor;
• The trustee;
• The beneficiaries;
• The person exercising control (if different from the above).

Required documents:

• Trust deed or founding document;
• ID documents of all parties, including UBO;
• Asset movement statements (e.g., bank statements);
• UBO declarations according to the structure.

Example: A family foundation registered in Liechtenstein transfers funds to a European company. Required documents: founding deed, list and IDs of beneficiaries, UBO declarations, bank statements.

Key trust participants:

• Settlor: Establishes the trust and transfers ownership of assets. May retain a level of control, making them a potential UBO.
• Trustee: Manages the trust assets in line with settlor’s instructions. If they have significant discretion or control, they may also qualify as a UBO.

4. Offshore Companies and Opaque Structures

These entities attract heightened regulatory attention. A strict approach is necessary, especially where economic substance is lacking.

Required documents:

• Certificate of incorporation and Certificate of Good Standing;
• Shareholder certificates;
• UBO declarations;
• ID document of identified UBO;
• Financial statements, tax records, and bank documents proving activity.

Example: An offshore company in the BVI invests in real estate in Bulgaria. Required documents: Good Standing certificate, ownership chart, UBO declaration, passport copy, transaction extract

Practical tip: If the offshore structure lacks operational logic or economic documentation – consider rejecting the business relationship.

Certification and Formal Requirements: Apostille, Legalization, or Simple Form?

When collecting UBO documentation, the question often arises: is a simple signed declaration enough, or is notarization, apostille, or legalization needed?

Each institution should define an internal policy reflecting risk-based and jurisdiction-specific considerations.

Documents with apostille/legalization/notarization Pros:

• Increased legal validity and verified document origin;
• Suitable for high-risk clients (PEPs, offshore, third countries);
• Acceptable as evidence during regulatory audits;
• Strengthens trust and cross-border verification.

Cons:

• Higher administrative and financial burden for clients;
• Slows down onboarding;
• Legalization may be complex and costly in some countries.

Simple form documents (signed, no notarization) Pros:

• Faster processing and easier client submission;
• Suitable for low-risk EEA clients or transparent structures;
• Lower administrative burden;
• May suffice when verified via public registry.

Cons:

• Less legal weight in disputes or audits;
• Higher risk of document forgery;
• Not accepted in some jurisdictions for official verification.

Recommendation:

• For low-risk EEA clients: allow simple form + public registry verification;
• For high-risk clients (PEPs, offshore, sanctioned): require at least notarization, and apostille/legalization if needed;
• Establish a risk-based internal process defining when and what kind of certification is needed.

Keeping UBO Information Up to Date

UBO information must be regularly updated—not just identified once. Regulators expect entities to maintain UBO data as accurate and current.

Review frequency by client type:

• Low-risk clients: every 2–3 years;
• Medium-risk clients: every 12–18 months;
• High-risk clients and PEPs: every 6–12 months.

Trigger events for UBO reassessment:

• Changes in ownership or management;
• Internal or third-party alerts;
• Adverse media or sanctions;
• Routine file reviews including ownership structures.

Methods for gathering updated information:

• Send a standard UBO questionnaire and declaration;
• Request a fresh trade register extract;
• Ask for an updated ownership chart and valid ID;
• Use external providers for automated checks.

Practical tips:

• Set automated reminders for review deadlines;
• Use digital forms and e-signatures for client convenience;
• Define clear roles between front-office and compliance.

Small vs. Large Companies – Differences in UBO Identification

The UBO identification process is mandatory for all obligated entities, but the implementation approach can differ greatly depending on company size and resources.

Large companies with internal capacity Advantages:

• Dedicated AML/Compliance departments;
• Use of specialized software;
• Real-time checks and access to global databases;
• Clear policies and regular internal audits.

Practice:

• UBO checks are integrated into KYC onboarding;
• Strict risk-based verification for complex structures.

Small companies with limited resources Challenges:

• No dedicated AML/Compliance staff – often handled by managers with other duties;
• Manual processes;
• Limited access to paid databases or legal advice.

Practice:

• Use of templates and standardized questionnaires;
• Rely on public registers and notarized documents;
• High-risk clients are referred for consultation or rejected if concerns arise.

Recommendation: Small firms can be effective by:

• Using external consultants or partner platforms;
• Creating simple but clear risk-based procedures;
• Conducting regular AML training, even with small teams.

Regardless of scale, the goal remains the same – clear identification and traceability of those who control the client structure.

Common Mistakes in UBO Identification

Even with formal processes in place, certain recurring mistakes can lead to inaccuracies or regulatory breaches:

• Accepting declarations without supporting documents;
• Skipping checks in public registers or commercial databases;
• Ignoring control through contractual or operational mechanisms;
• Failing to trace ownership chains to the final UBO;
• Not reassessing after structural or management changes.

International Differences in Transparency and UBO Approach

UBO identification is influenced not only by regulation but also by cultural and legal traditions:

• UK: Public UBO register exists, but nominee directors and shareholders are common. Power of attorney arrangements must be reviewed.
• Offshore zones (e.g., BVI, Panama): No public UBO disclosure obligation. Reliance on notarized documents, contracts, and independent legal opinions.
• Germany and France: Stricter enforcement post-5AMLD, especially for banks and insurers.
• Middle East: UBO registration required in some countries, but cultural sensitivity to confidentiality may impact enforcement.

Sanctions and Fines for UBO Failures

UBO identification failures can lead to major penalties and reputational damage:

1. ING Bank (Netherlands)
Fined €775 million in 2018 due to control deficiencies, including poor UBO checks.

2. Deutsche Bank (Germany)
Fined €13.5 million in 2019 for UBO-related AML shortcomings.

3. Danske Bank (Denmark)
Involved in a €200 billion money laundering scandal. Lacked adequate UBO checks and source of funds verifications. Resulted in resignations and cross-border investigations.

How Compliance Navi Can Support You

Compliance Navi offers practical solutions for identifying and verifying UBOs. We assist you with:

• Developing internal UBO identification policies and procedures;
• Preparing customized questionnaires, checklists, and document templates;
• Providing trainings and workshops with real-world examples and case studies;
• Supporting the review and analysis of specific client files;
• Assisting in regulatory inspections and audits.

Contact us to build transparent and secure AML processes together.