Guideline for Identifying the Ultimate Beneficial Owner 2022

Guideline for Identifying the Ultimate Beneficial Owner 2022

Introduction:
The regulatory authority requires licensed financial institutions to identify the ultimate beneficial owner (UBO) of their clients. This identification process is crucial for assessing risk, ensuring compliance with anti-money laundering (AML) laws, and maintaining accurate records. The guideline outlines the procedures for identifying UBOs, clarifies definitions, specifies legal obligations, and details the consequences of non-compliance. It is based on Article 39 of Law No. (10) of 2015 concerning the regulation and supervision of financial institutions, as well as subsequent amendments.

Objective:
The guideline aims to provide clear instructions for licensed financial institutions on identifying UBOs, ensuring accurate and timely disclosure, and maintaining up-to-date records. It serves as a practical reference for institutions to comply with regulatory requirements, mitigate risks, and fulfill their legal obligations under the relevant laws.

1. Definitions:

• Ultimate Beneficial Owner (UBO): The natural person(s) who owns or controls a legal entity, either directly or indirectly, through ownership of shares, voting rights, or other means, and/or the natural person(s) on whose behalf a transaction is conducted.
• Control: Substantial influence or effective control, whether direct or indirect, over a legal entity.
• Direct Ownership/Share: The actual ownership/share held directly by a natural person.
• Client: A natural or legal person who establishes a business relationship with a licensed financial institution.
• Regulated Entities: Licensed financial institutions subject to AML/CFT regulations.

2. Legal Scope of UBO Identification:
The obligation to identify the UBO applies to licensed financial institutions as per Article 39 of Law No. (10) of 2015, and subsequent amendments. It covers direct and indirect ownership, control mechanisms, and the requirement to maintain accurate records. The guideline aligns with international standards (FATF) and local regulations, ensuring consistency across banking, non-banking financial institutions, and other regulated entities.

3. Consequences of Incomplete, Inaccurate, or Untimely UBO Information: Failure to identify the UBO accurately and in a timely manner may result in regulatory sanctions, including fines, suspension of business activities, or revocation of licenses. Specific consequences include:

1. Suspension of the client's account.
2. Restriction on conducting transactions with the client until UBO identification is completed.
3. Imposition of administrative penalties on the regulated entity for non-compliance.

4. Means Used to Conceal the UBO Identity: The guideline lists methods used to conceal the true identity of the UBO, including:

1. Nominee shareholders.
2. Trusts or foundations with nominee directors and beneficiaries.
3. Use of intermediaries or agents.
4. Holding companies with nominee directors and shareholders.
5. Use of professional service providers (lawyers, accountants, corporate service providers).
6. Use of trusts or foundations with nominee directors and beneficiaries.

5. Guidelines to Consider in All Client Relationships (Acceptance/Handling of Legal Persons and Legal Arrangements): Regulated entities must identify the UBO for all clients, whether natural or legal persons. Key considerations include:
a. Client Transparency and Cooperation: The client must provide accurate information, cooperate fully, and disclose the UBO clearly. b. Understanding Ownership Structure and Rationale: Regulated entities must understand the ownership structure, verify the rationale behind it, and ensure compliance with AML/CFT requirements.
c. Identifying UBO through Control: Focus on natural persons who exercise control, either directly or indirectly, through voting rights, board representation, or other mechanisms.
d. Procedures for Identifying UBO Representatives: Steps to identify natural persons acting on behalf of the UBO, including verifying their authority and ensuring accurate record-keeping.

e. Accessing Data and Information from Official Documents: Regulated entities must verify UBO information using official documents, such as commercial registers, tax records, and legal certificates. f. Periodic Updating of Information and Documents: UBO information must be updated regularly, at least annually or upon material changes, to ensure accuracy and compliance. g. Obtaining a Written Declaration from the Client: Clients must provide a written declaration specifying the UBO for the specific transaction or business relationship.

6. Minimum UBO Identification Information Required: a. If the client is a legal entity:

1. The name of the UBO (natural person) and their ownership/share percentage.
2. The method of identification (direct/indirect) and supporting documents.
3. Details of the UBO's identity (ID number, nationality, address).
   b. If the client is a non-profit organization (NPO): Regulated entities must identify the UBO, considering the nature of the NPO, its funding sources, and activities. The guideline provides specific rules for NPOs to ensure transparency and mitigate money laundering risks.

7. Identifying UBO according to Ownership Nature and Form: (Examples of ownership forms)

1. Direct ownership.
2. Indirect ownership.
3. Mixed direct and indirect ownership.
4. Ownership with specific conditions or clauses.

8. Below are diagrams illustrating ownership structures: [Page 8 of 12] [Page 9 of 12] [Page 10 of 12]

Other Considerations Regarding Ownership Structure:

1. If the UBO is a natural person, their identity must be verified and recorded.
2. If the UBO is a legal entity, its registration details must be verified.
3. If the UBO is a trust or foundation, its governing documents must be reviewed.
4. If the UBO is a holding company, its ownership chain must be traced to the natural person(s).
5. If the UBO is a non-profit organization, its funding and activities must be assessed.
6. If the UBO is a government entity, its status and role must be documented.
7. If the UBO is a professional service provider, their credentials and role must be verified.
8. If the UBO is a family-owned business, succession plans and control mechanisms must be considered.
9. If the UBO is a foreign entity, cross-border ownership structures must be analyzed.
10. If the UBO is a listed company, public disclosures and voting rights must be reviewed.

Reporting Suspicious Transactions:
Regulated entities must report suspicious transactions to the relevant authority in accordance with AML/CFT regulations.
Contact details for reporting: Email (iq.aml@info, iq.aml@str) and Phone (+964 783 262 9650).
Additional guidance is available on the regulatory authority's website.