Ultimate Beneficial Ownership: Why Acquirers Ask for Company Structure

You’ve likely experienced it during the merchant onboarding process, the request for a deep dive into your company's structure, including the identity of your Ultimate Beneficial Owners (UBOs). This isn't just a bureaucratic formality; it's a critical part of an acquirer's due diligence to protect against financial crime.

What is Ultimate Beneficial Ownership (UBO)?

An Ultimate Beneficial Owner is a natural person who ultimately owns or controls a company. This goes beyond the legal owner listed on paper, piercing through layers of corporate structures, shell companies, and trusts to find the individual who truly benefits from the business's profits or has significant control over its decisions. Regulators, such as the Financial Action Task Force (FATF), typically define a UBO as someone who owns 25% or more of a company or exercises control in other ways.

Why Acquirers Care About Your UBOs

The primary reason acquirers and other financial institutions ask for this information is to comply with global Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations. Criminals often use complex corporate structures to hide the origin of illicit funds. By identifying UBOs, an acquirer can:

• Prevent Financial Crime: By knowing who is really behind a company, an acquirer can prevent their payment network from being used for illegal activities like money laundering or terrorist financing. This is particularly crucial for high-risk merchants, such as an adult subscription site or a crypto casino, which face heightened scrutiny due to the nature of their business.

• Mitigate Risk: A clear understanding of your company's ownership helps the acquirer assess risk. If a UBO has a history of financial misconduct or is on a sanctions list, the acquirer can take appropriate measures to decline the application or apply enhanced due diligence.

• Maintain Regulatory Compliance: Failure to properly identify and verify UBOs can result in severe penalties, including massive fines and the loss of an acquirer’s license. By collecting this information, they are fulfilling their legal obligation to "Know Your Business" (KYB).

UBO and Company Structure in Practice

The process of Ultimate Beneficial Ownership verification involves more than just asking for a name. Acquirers analyze your corporate structure to trace ownership and control, looking for red flags like unnecessarily complex arrangements or frequent changes in ownership. This ensures they have a complete picture of who they are doing business with.

If you are a high-risk merchant or simply a business with a complex corporate structure, navigating these requirements can be challenging.

For expert guidance on UBO and company structure verification for your merchant application, PayConsults can help. We streamline the process to ensure you meet all compliance standards and get your business operational quickly. Contact PayConsults today to learn how our solutions can help you.