The need to have accurate and updated information useful to trace the ultimate beneficial owner represents a cornerstone in the due diligence process, for any entity that want to verify reliability and reputation of its counterparties (customers, suppliers, clients).

Identifying the beneficial owner means knowing the identity of the actual ultimate beneficiary of service or manufacturing company.

The identification of the beneficial owner makes possible to understand whether, at the head of a company or a chain of companies, there are subjects involved in illicit activities who screens their ownership thanks to shell companies or trust.

From this point of view, both the national legislation and the EU legislation upstream, dedicated to countering the  money laundering and terrorist financing, has always put particular attention to the beneficial owner.

The problem identifying the ultimate beneficial owner

The biggest problems in identifying the beneficial owner arise when the legal entity is not controlled directly by a natural person largely than 25% (direct ownership principle).

In this case, two paths appears:

  1. Move up the chain of control of the company searching for natural persons with a weighted shareholding of more than 25%. At this stage, it is important to verify the congruity of the information released by the subject and carefully assess the reason for possible discrepancies.  in this last case the client’s risk profile can be significantly increased.
  2. If no natural person is directly or indirectly the owner of a percentage of more than 25%, it is necessary to verify the existence of persons who can control or exercise a dominant influence in the general shareholder meeting, by acquiring official evidences that can represent a proof of certain powers or influences.

If no subject like these can be traced, the subjects with powers of administration or management of the company can be considered as actual owners; this is a rather frequent case, where no natural person is identified.

These days, the issue of the AML “beneficial owner” has become extremely topical, as from 22nd March 2021 the regulation introducing the BORIS system – acronym for Beneficial Ownership Registers Interconnection System- came into force.

The new BORIS system is a centralized research service that makes available the beneficial ownership information across European nations , following the EU Directive 2015/849 (Fifth Anti-Money Laundering Directive)

The characteristics of the BORIS system

The BORIS system – Beneficial Ownership Registers Interconnection System- is part of the European Union’s ambitious intent to put in place an increasingly extensive digitalization of the various sectors of justice and cross-border cooperation. This perspective arises from the need to strengthen the AML/CFT framework at EU level and, more specifically, the customer due diligence procedures adopted by obliged entities.

The objective is to ensure effective monitoring and recording of beneficial ownership information.

BORIS consist of a decentralized system that interconnects the nationals central registers of beneficial ownership and the European e-Justice portal through the European central platform established by Article 22(1) of Directive (EU) No. 2017/1132.

Therefore, the BORIS system shares the same platform with the Business Registers Interconnection System (“BRIS”) of Member States, which instead provides cross-border public access to information on companies and their branches established in other Member States, thanks to electronic communication between national business registers.

Who can access the BORIS system

The regulation first identifies the so-called “qualified users” who can access the BORIS system.

These include:

  • without any restriction, the national Financial Intelligence Units (in Italy UIF – Unità di Informazione Finanziaria);
  • the competent Authorities, i.e. the public authorities assigned responsibilities, for various reasons, in the fight against money laundering or the financing of terrorism – in Italy the Ministry of Economy and Finance, the supervisory authorities of the sector, the Guardia di Finanza operating through the Nucleo Speciale Polizia Valutaria the Anti-Mafia Investigative Directorate, the National Anti-Mafia and Anti-Terrorism Directorate, the Judicial Authorities (in accordance with their institutional attributions) and the authorities responsible for combating tax evasion (according to methods of access suitable for guaranteeing the pursuit of this purpose);
  • in the context of customer due diligence, the obliged parties.

BORIS users will be able to query the systems via the registration numbers of companies, trusts and other legal entities.

The national registration number and the company registration number is important to make a correct query.

The Regulation provides the option for Member States not to indicate the national registration number for trusts or related legal entities; the exemption applies only for a period of five years from the date the BORIS system becomes operational.

Each state will have the option of expanding the minimum mandatory information with additional information.

Specifically, states will require trustees of trusts to maintain adequate, accurate, and current information about the beneficial ownership of the trust. This information will include the identity of the “trustee”; the custodian (if any); the beneficiaries or class of beneficiaries; and other natural persons with effective control over the trust.

The Register of beneficial owners in Italy

As far as the establishment of the Register of beneficial owners in Italy is concerned, everything is still on stand-by. With provision no. 458 of March 19, 2021, the Council of State suspended the adoption of its opinion on the decree-draft created by the Minister of the Economy and Finance.

The importance of identifying the beneficial owner

Identifying the beneficial owner is one of the most effective actions to understand the reputation of the client, whether it is a matter of business interests or AML compliance.

This action therefore affects multiple parties:

  1. Businesses: assessing commercial reliability involves being able to verify the negatives associated with the counterparty. From this point of view, knowing the beneficial owner behind the company requesting supplies means knowing the REAL OWNER, in order to understand the negativity associated with the same, previous experience and business reputation; going beyond the shielding offered by an Italian or foreign company, which may present more or less transparent structures.
  2. Professionals: Customer due diligence is one of the most difficult anti-money laundering requirements for professionals.  The AML screening applies to both new clients and the existing clients.
  3. Those Companies subjected to anti-money-laundering legislation, as part of their client due diligence activities.

Always identify the beneficial owner with our “ARP” software: Cheope’s investigative advantage

Cheope Risk Management is able to provide, within a highly efficient suite of aml services, the identification of the beneficial owner following two main focus:

  1. Interpretation of recent legislation together with knowledge of several different cases;
  2. Direct access to all the relevant information sources, to produce documental evidences useful to attest the ownership following the main ownership principle.

A.R.P. allows to activate the interaction between different types of risk scores (external; internal, others), in order to provide a synthetic indicator of risk, fully traced and certifiable in its components.

A.R.P. manages even the most sensitive situations, thanks to the possibility of integrating, where necessary, targeted investigations to assess the income, equity and reputation profile of the subject.

Each company can advantage from the right tools.

Cheope match strong ability in data providing, both official and investigative, with a focus to the Client’s need.

We can provide official evidences and investigative focus, linked together by a strong and clear reporting.

Our AML and CFT screening Service advantage from expertise and deep knowledge of the legislative frame.

And when you need assistance, CHEOPE’ staff is ready to support you directly from the headquarters in Lodi, Viale Milano 40.

Get in touch with us, we will empower together your AML process.