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Ultimate Beneficial Owner
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Financial transparency has become a priority for many governments and agencies around the world, ensuring that effective due diligence is now mission critical for certain organizations.
It is no longer possible to enter into a contract or business relationship without detailed, documented knowledge of the target entity without incurring substantial risk. Until recently, it was possible to keep financial interests confidential, but the regulatory environment has tightened to such an extent that this is no longer possible. Governments keen to attract investment are eager to show that they offer a healthy environment to do business, and that there is no place for corruption, fraud, human trafficking or threat finance, as well as many other ills.
Financial secrecy doesn’t always hide financial wrongdoing, however. It is entirely possible to be on the right side of the law but be ethically challenged. We saw this in the release of the Panama Papers – whilst there was little evidence of financial crime, it was not for nothing that people chose to place their money in offshore bank accounts, and that was to avoid scrutiny. While no law has been broken, this creates a great deal of public unease and a sense of injustice, and heightens the risk of regulatory degradation.
The Panama Papers therefore serve to illustrate the importance of conducting proper due diligence. It is now vitally important to identify the ultimate beneficial owner of any companies you may have an interest in – a failure to do so can result in a substantial fine and / or reputational damage.
Unfortunately, regulators appear to assume that the task of obtaining ownership information is straightforward, it is however anything but. While ownership documentation is often required as part of the onboarding process, the task of continuously monitoring ownership changes and verifying client-provided details can present serious challenges due to the lack of transparency, especially for privately-held companies.
In this podcast, James Swenson, Head of Financial Crime and Reputational Risk Managed Services at Thomson Reuters, speaks to Former Rear Admiral Chris Parry about the various issues of understanding ultimate beneficial ownership and why it is an increasing challenge for compliance officers.
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