AML5 ahoy! In the 5th incarnation of the Anti-Money Laundering Regs more people will have to be verified for KYB. Rather than one Ultimate Beneficial Owner (UBO), now anyone with a 25% share (or in a significant shareholding group) will have to be verified.
In this blog we tell you about a key detail of AML5, and how we can help you meet the new regulation coming into effect in January 2020.
Ultimate Beneficial Owners
Generally, when we speak of an owner, we immediately think of the person holding the majority of the shares. Because the number of shares is associated with the number of voting rights. However, we know that the capital of a company can be organised into different classes of shares, each with different voting powers, or even no voting rights at all.
It will therefore be the ability to vote, and therefore to control the company, that will be decisive in determining the Ultimate Beneficial Owner(s) for AML5.
The 25% threshold
It is from a holding of more than 25% that the Directive considers that one is the owner of a company, therefore ultimate beneficial owners.
But this 25% can also be held by a group of people, bound together by different types of agreements.
In order to determine whether or not there is a group that has to be recognised in this context, we come back to the way these people vote. If they vote together, there is a group. This means, for example, that 5 persons each holding 10% of the voting rights, but who, for various reasons, vote together, will be considered as a group, therefore each are identified as ultimate beneficial owners.
In the minds of many professionals, there is often confusion as to which shareholders to identify in practice. This is obviously a question of circumstance. There would not be the same approach for a listed company as an investment fund. In most cases however, where grey areas exist, it will be safer to verify anyone with a significant share.
What does this all mean?
Essentially, previously it may have been enough to name and verify the main shareholder, but now anyone with a significant share and vote in the company will have to be named and verified.
Ultimate beneficial owners that are part of a group, in terms of shares and votes, adds nuance to the regulation, and may need to be considered on a case by case basis (where there is any uncertainty). However, we suggest in this respect to err on the side of caution.
We’ll come back to you with more AML5 info and insights soon, but what’s clear is the need for accessible and easy Identity Verification for anyone who could count as a UBO, as well as the need for address verification and PEPs & Sanction checks, to Know Your Business (KYB) fully and comply with AML5 (5AMLD Fifth Anti-Money Laundering Directive).
How Hello Soda can help
At Hello Soda we provide all of these solutions, with UtilityConnect for address verification, PepCheck for PEPs & Sanctions and a suite of digital identity verification tools, all available through a single API, to verify any UBO around the world in seconds (via tools such as Profile iD for social authentication, iDocufy and BioMatch for ID document and facial recognition verification, along with UtilityConnect to confirm address).
AML5 is coming soon, and means major shareholders will have to be identity verified. We offer an automated, and highly accessible one-stop-shop for all of your KYB merchant verification needs, so please get in touch here if you would like to ask any questions, or if you prefer to book a free demo to see these tools in action then you can do so here.