How to Support Your Organization’s UBO Requirements

The concept of ultimate beneficial ownership (UBO) is part of an international effort to shed light on who actually owns or controls a company. The goal behind this effort is to combat financial crimes like money laundering and tax evasion. 

To catch up with the rest of the G20, all of which have already enacted UBO regulations, the United States passed the Corporate Transparency Act. Pending any delays, the CTA comes into force on January 1st, 2024.

With the deadline rapidly approaching, it is vital that you understand your organization’s UBO responsibilities. More importantly, you must put resources in place to achieve and maintain CTA compliance. Here is what you need to know. 

Basics of Ultimate Beneficial Ownership

Ultimate beneficial ownership refers to the individual or entity that directly or indirectly exercises substantial control over an entity or owns 25% or more of an entity. Under the 25% rule, an entity could have up to four different ultimate beneficial owners. 

However, the definition of an ultimate beneficial owner is quite broad. It also includes individuals who exercise control over an entity via any “contract, arrangement, understanding, relationship, or otherwise.” 

Ultimate beneficial ownership disclosure legislation, such as the CTA, prevents key stakeholders and beneficiaries from concealing their identities between layers of trusts or corporations. By mandating UBO reporting, regulators can determine who is actually guiding the direction of a business. 

Why UBO Matters

Ultimate beneficial ownership is an international regulatory phenomenon. Whether you operate primarily in the United States or oversee international entities, you will undoubtedly encounter UBO regulations. While each jurisdiction is responsible for setting its own penalties, all G20 UBO laws share one commonality: they have harsh repercussions for violators.

Achieving UBO compliance is not just important for compliance purposes, though. UBO also helps prevent shady business dealings like money laundering, tax evasion, and the funding of illegal activities. For legitimate businesses, complying with ultimate beneficial ownership regulations demonstrates to prospective partners that they have nothing to hide. 

Who Will Be Impacted?

The CTA might initially seem to only impact major corporations. According to the National Federation of Independent Business (NFIB), however, the Corporate Transparency Act is going to have a huge impact on small businesses, too. The NFIB estimates that the CTA will create $5.7 billion in regulatory costs for America’s small businesses and lead to an additional 131.7 million hours of paperwork. 

The Costs of Noncompliance

In the United States, CTA laws will be enforced by the Financial Crimes Enforcement Network (FinCEN), a division of the Department of the Treasury. Penalties for noncompliance are steep and follow an escalating structure. 

Per-day fines start at $500 and can reach up to $10,000 per violation. Those failing to properly comply with the CTA’s requirements could also face prison time. The American Bar Association also reports that violators will face aggregate fines for failing to file an initial report. These fines could greatly exceed the $10,000 threshold. 

When assessing violations, the FinCEN will consider the reporting company’s intent. If it finds that the violator acted maliciously or with blatant disregard for the CTA, the violator could face additional criminal penalties. 

Getting Started: Data Collection

Supporting your organization’s ultimate beneficial owner requirements starts with data collection. You’ll need to collect:

  • Basic Info: Start by gathering the basics about your beneficial owners, such as names, birthdates, addresses, and contact information 
  • Documentation: Make sure to collect relevant documents like ID cards and passports to verify the information you have gathered 
  • Ownership Details: This doesn’t just include who owns the most shares but also how much say they have in business decisions due to other agreements

You’ll need all of the above to file your ultimate beneficial owner documents with FinCEN. Gathering all of this information for a single entity may not be a big task. But if you manage dozens of entities, it can quickly become a tedious, challenging process. 

Supporting Compliance Through Software

While you have a lot of data to collect, you don’t have to drown in stacks of physical documents. There are plenty of software solutions that can make ultimate beneficial owner reporting more of a frictionless experience. Specifically, you should focus on corporate governance and entity management solutions that:

  • Unify your entity data
  • Offer customization options
  • Feature robust dashboards
  • Keep track of changing regulations 

An all-in-one cloud-based platform will help you navigate the Corporate Transparency Act and whatever other financial regulations may be over the horizon. 

Simplify the Path to UBO Compliance With Athennian

Athennian’s best-of-breed corporate entity management and business governance platform provides customizable tools, reporting capabilities, and automation software. Cumulatively, these tools and functionalities simplify CTA compliance and empower your organization to meet ultimate beneficial owner reporting requirements.

Request a demo to see how Athennian can support your organization’s UBO requirements. 


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