Understanding Beneficial Owners – Who is ‘Hiding’ Behind the Name of Your Business Partner

In the era of globalization, determining and verifying ownership has become a necessary process that ensures safe, harmonious, and sustainable business operations. Irregularities can result in hefty fines or even the revocation of a business license. Therefore, it is essential to invest in and develop compliance programs even during a crisis period. By adhering to a compliance program, you limit risks and safeguard the reputation of the company you have built over the years.

Croatia is below the EU average in the corruption perception index

In 2020, the international organization Transparency International ranked Croatia 63rd among 180 countries in its Corruption Perception Index (CPI) with a score of 47 out of 100. Croatia has not made any progress since 2013 and is again below the EU average of 66. Along with Bulgaria, Romania, and Hungary, which have a score of 44, Croatia is among the most corrupt countries in the European Union.

At Transparency International Croatia, they believe that corruption is linked to greed, theft, and irresponsible behavior of individuals, and the poor result is a consequence of insufficient strengthening of preventive bodies and prolonged court proceedings that undermine the real fight against corruption. They also concluded that the COVID-19 pandemic has caused additional unexpected pressure on the integrity of the system in many European countries and created a political crisis that threatens the future of democracy.

Legal frameworks have long existed to prevent and detect fraud, corruption, tax evasion, and criminal activities that regulate the disclosure of ownership and supervisory structures. However, scandals such as the Panama Papers, Unaoil, and VimpelCom have shown that there are some ownership connections and deals well hidden from public view.

It is becoming increasingly clear that client verification has become a necessary process in ensuring safe, harmonious, and sustainable business operations. For a better understanding of actual ownership structures, Dun & Bradstreet has prepared a free e-book.

Searching for beneficial owners is often a significant challenge

Every year, millions of new companies are registered worldwide, including those that do not intend to operate legally. Their ownership structures are often complex (e.g., straw members of the company) and changes can occur in multiple layers. Entities in the structure can change and be registered in countries that fall into higher-risk categories (e.g., tax havens). Authorities in some countries, such as the U.S. capitals of straw companies in Nevada, Wyoming, and Delaware, provide a high degree of secrecy, making it difficult to ascertain and verify ownership.

The largest global business database of Dun & Bradstreet allows the discovery of over 150 million connections between owners and companies and insights into business units and beneficial owners with an accuracy of up to 0.01 percent. It contains business information on 130 million shareholders and over 420 million business records in more than 200 countries, most of which are updated daily. Companies thus gain clear insights and information about risks associated with business partners.

Regular annual reviews of business partners are no longer sufficient

Monitoring business partners is usually conducted in the form of regular annual reviews that often only include a simple check of legal ownership or just a review of the business partner with whom the organization has an immediate relationship. Important changes may be overlooked, while others may be unnecessarily included. Beneficial owners can extend across multiple layers and companies, and the entire ownership structure may not be revealed during such a review.

Additionally, the risk assessment of a customer may change due to significant changes in beneficial owners over the years, without you being aware of those changes. Whether you have been working with someone for years or are just considering collaboration, it is important to repeatedly and thoroughly verify the data about the company and the owner. Knowing the actual ownership of all entities you do business with as customers, suppliers, or other business partners meets compliance requirements, while also ensuring transparency and protecting the reputation of your brand, especially during times of increased scrutiny from regulators, consumer rights advocates, and shareholder activists.

– To more easily and effectively determine beneficial owners, we advise first identifying your global business partners, companies, and executives and obtaining complete company data. Then check entrepreneurial structures and hierarchies on a global level to understand the background of your business partner and identify beneficial owners. You can check an individual and the entire company against more than 700 international sanction/watch lists and 1.8 million PEP lists. You can also set up automatic alerts for structural changes in beneficial owners and ownership connections with your business partners to respond to them in a timely and appropriate manner – say Dun & Bradstreet, the leading global provider of business data and analytics.

Laws and regulations require a good understanding of owners

Ownership is a key topic in the latest comprehensive collection of international sanctions and regulations in the field of preventing money laundering and financing terrorism, as well as laws and standards for fulfilling tax obligations, such as the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). Important regulations in this area include the Fifth EU Directive on preventing money laundering (5AMLD), which has set expectations regarding the monitoring and continuous updating of data on beneficial owners, and the Sixth Directive, which introduces new changes in the area of preventing money laundering through provisions on the application of criminal law, such as the definition of cyber and environmental crime.

The impact of laws and regulations on the financial services industry is well known, and this directly affects other organizations that are required to disclose data from Know Your Vendor (KYV) and other business partner (KYTP) processes. At Dun & Bradstreet, they assist thousands of regulated companies in meeting legal requirements, reducing necessary resources, and avoiding regulatory penalties. With their support, you will protect your brand and achieve credibility and sustainability for your business.

About Dun & Bradstreet

In early 2021, Bisnode acquired Dun & Bradstreet, and we are moving into the future as one company that combines local and global expertise and skills. We offer our clients and business partners a wide range of data and insights to facilitate smart decision-making and gain an even greater competitive advantage.

Dun & Bradstreet, the leading global provider of business data and analytics, enables companies worldwide to make better decisions and improve business performance. The Dun & Bradstreet data cloud is the foundation for faster solutions while providing insights that allow clients to increase revenue, reduce costs, mitigate risk, and transform their business. Since 1841, Dun & Bradstreet has been helping companies of all sizes navigate risks and identify opportunities.

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