Beneficial ownership: Increasing transparency and ensuring compliance

Beneficial ownership: Increasing transparency and ensuring compliance

By Anders Rodenberg, Head of Financial Institutions and Advisory, Americas, Bureau van Dijk, A Moody’s Analytics Company

Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I’m the Head of Financial Institutions and Advisory in Americas for Bureau van Dijk. Where I have led multiple risk projects – including projects involving credit, tax, sanctions and money laundering risk – with the aim of improving overall risk management at financial institutions, insurance companies and traditional corporates.

Much of my work has been focused on creating operational efficiencies within institutions and reducing financial and regulatory risks through global standardization and introducing global ownership structures into risk models and procedures.

During my time at Bureau van Dijk, I have held several positions in Europe and the US building key relationships with regulatory authorities and industry leaders in numerous countries, speaking on current trends and developments as it relates to compliance regulations.

What, for you, are the benefits of attending a conference like the Fraud and Financial Crime USA Congress and what can attendees expect to learn from your session?

Attendees of my session can expect to learn how to manage the challenge of corporate ownership changes to comply with the OFAC 50% Rule; review different ways to Identify 50% owned subsidiaries of sanctioned Individuals and entities via direct, Indirect or aggregate ownership; and gain Insight on how globalization and the 50% rule have created inadvertent sanction exposure in traditional sanctions programs.

How can beneficial ownership be implemented to increase transparency and ensure compliance?

Beneficial Ownership should be identified in the beginning of a customer onboarding process for correct risk classification and ensure compliance with OFAC’s 50% rule. Legal compliance depends on jurisdiction. For example, the FinCEN CDD-rule allows for being compliant by just having the customer provide the BO-information without the need of verification. if the listed BO’s are in reality the BO’s. In EU’s 4th AML Directive, an effort to try and verify is needed.

How can high risk customers be better identified?

Historically many AML customer risk models have been focused on the target/counter party itself:

  • What is the country risk?
  • What is the industry risk?
  • What product risk?…

In a global world, beneficial ownership is needed to understand the actual risk of exposure. If a customer is located in a low risk country, but the beneficial owners are located in a high risk country, then the customer risk profile needs to reflect this. There are still many institutions that have not integrated ownership risk into their risk models. In the future, this is critical to avoid any surprises.

What are the challenges and opportunities to leveraging information?

The challenge with identifying BO’s is globalization; i.e. corporate hierarchies are often multiple levels and span across multiple countries. Some of these hierarchies even include circular ownership (companies owning themselves with a certain percentage), which makes the BO even more difficult to identify. One of the largest challenges isn’t collecting the BO information, but maintaining it as ownership information is extremely dynamic with millions of changes happening every month globally. In addition, individuals with criminal intent try to hide their true ownership structure and obstruct the collection of correct Information.

However, once the information is collected, it also creates many opportunities for institutions, if the information is structured and automatically maintained. A classic example is that the business development side of an organization can utilize the hierarchy information to improve their activities (reaching out to sister company and pitching client relationship is easier than pitching to cold and independent company with no existing ties to the institution) and thereby increasing revenue growth.

How do you see the impact of Fraud and Financial Crime evolving over the next 6-12 months?

There is already a large focus on the need for Beneficial Ownership data within fraud and financial crime, but the focus and implementation of the ownership information is expected to increase within the next 6-12 months.

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