Sanctions compliance & Beneficial owners: Why does it matter for your KYC process?

Source: Moody`s Analytics

On June 21, SME Banking Club, together with Moody’s Analytics, held a webinar on Sanctions compliance & Beneficial owners: Why does it matter for your KYC process?

Andrej Kovacik (Moody’s Analytics) began his speech by explaining who the beneficial owner is. He proposed three definitions that best explain this concept. First of all, the beneficial owner is a person who enjoys the benefits of ownership even though the title to some form of property is in another name. Secondly, it could be an individual or a group of individuals as well, who directly or indirectly, can vote or influence the transaction decisions regarding specific security. Thirdly, it’s also an individual or a group of individuals who can control or influence the subject entity by aggregating the ownership schemes.

Andrej Kovacik also noted that the concept of “25 %” is no longer the main feature of determining the beneficial owner, as it was before.

The next important aspect which was discussed during the webinar – there were sanctions. Andrej Kovacik identified four types of sanction risk:

· Sanctions lists,

· Ownership or control,

· Comprehensive,

· Cautionary.

He also compared the sanction check which was before, and which is functioned now. In conclusion, the sanctions increase every year.

In the next part of the webinar, Andrej Kovacik noted that the sanction exposure is mostly hidden intentionally and explained “the 50 % rule”. Nevertheless, this area also has its gray zone. This can occur due to the wrong company match, the missed change in the ownership, and an unknown sanctioned shareholder. However, monitoring is a key component of proper KYC!

Where to search for beneficial owners?

The customers can obtain the data by using business and other registers, with a help of self-disclosure, and through the data vendors. Moreover, the beneficial ownership registers are implemented in many countries and the ultimate goal is to have one beneficial ownership register of the EU which will serve all member states.

In the last part of the speech, Andrej invited the attendees to get acquainted with practical examples related to “the 50 % rule” in split, BO calculation, and challenges to identify UBO.

During the Q&A session, Andrej Kovacik and Olena Gryniuk (SME Banking Club) discussed the possibilities of automation beneficial ownership and sanction checks.


To learn more details, watch the full webinar below: