The Challenges of Identifying a UBO in Asian Markets

The Asian Market can present unique challenges when trying to identify a UBO

Before you can identify a UBO, you first have to understand the term. 

An ultimate beneficial owner is an individual or individuals who either own the business or have a controlling interest. 

For example, a UBO can have a minimum ownership in the company, typically around 25 percent. A UBO can also be a shareholder with 25% of the company’s voting rights. 

An ultimate beneficial owner does not have sole ownership or control of the majority of the company’s voting rights, but they have an invested stake in the business and have a say in the direction the organization takes. 

Risks of Not Identifying the UBO

With only around 25% ownership or voting rights, the UBO may seem insignificant in company operations. However, nothing is farther from the truth. 

The UBO can control finances and make important decisions for the company that are not always legal. 

Even though the financial risks associated with money laundering for criminal organizations are the headlines often making news, this is not the only potential issue affecting the Asian and other international markets. 

Two examples include, 

• The Ministry of Finance in India is broadening the scope and applicability of the country’s Prevention of Money Laundering Act (PLMA) in 2023. Along with including banking intermediaries, accountants, independent financial companies, and real estate agents are now regulated by the Act. 
• Singapore is introducing new AML standards in 2023 for real estate developers. Developers must perform risk analysis before starting any project and perform customer due diligence. Any suspicious transactions must be reported to the government. 

While India and Singapore are taking steps to prevent financial fraud, it is still your responsibility to perform a UBO search. Unfortunately, this presents some unique challenges for foreign and local Asian companies. 

Challenges of Identifying a UBO

Sometimes, identifying the UBO is simple. A quick UBO search often turns up the information you need. However, the Asian market has a few unique challenges that can make the process more complicated. 

Here’s a look at some of the challenges you may face in your search. 

• Complex ownership structures. A complex corporate structure is not unique to Asian businesses but it is more common due to cultural practices and intricate economics. The ownership structure often stretches across multiple cities and countries. For example, the People’s Republic of China and Vietnam typically have significant state ownership in their company structure, while India and Korea tend to follow a family-oriented business plan. You can spend months untangling either type of business model to find the UBO. 
• Did you know there are over 3,000 unique languages in Asia? This often creates linguistic barriers, making it difficult to locate the UBO. Your questions can go unanswered due to the language barrier. While transparency is encouraged in business operations, language barriers often get in the way.
• Disclosure agreements also vary across Asia. China requires all businesses to register their UBO, and Singapore only releases the information to law enforcement. 

Even though you should expect to run into challenges, with time and effort you can identify the UBO.