Regulators have set their sights on UBOs as a tool in preventing financial crime for exactly those reasons.
In January 2021, the United States enacted the Corporate Transparency Act (CTA) as part of the 2021 National Defense Authorization act, in an effort to better crack down on shell companies. These have been a huge challenge for organizations fighting money laundering in the US. The CTA establishes a national registry of ultimate beneficial ownership for corporations. The new law primarily impacts small businesses, but it effectively creates a new resource financial institutions may be able to rely on for customer onboarding and ongoing due diligence.
In Europe, both the 4th and 5th Anti-Money Laundering Directives imposed new regulations on UBOs. 4AMLD established the definition of a UBO as having more than 25% control of shares and voting rights in a legal entity, or having power over management boards, or being the ultimate beneficiary of a transaction. It also required European countries to keep ownership information in a central registry. 5AMLD, which came into effect in January 2020, reinforced those regulations and put a timeline on the creation of UBO registries.
These recent pieces of legislation on both sides of the Atlantic point to a clear trend: mandating up-to-date, accessible information on ultimate beneficial ownership is a priority for regulators in the fight against money laundering. They also hold the possibility of being a new potential resource for financial institutions. Centralized databases of UBOs could end up an important tool to facilitate the compliance obligations of financial institutions.