Running a business in the UAE is exciting with great opportunities; however, it may also be challenging to understand all legal requirements. Most businesses in UAE including DNFBPs (Designated Non-Financial Businesses & Profits), FIs (Financial Institutions), VASPs (Virtual Asset Service Providers), and NPOs (Non-Profit Organisations) and others remain confused about the regulations related to Ultimate Beneficial Ownership (UBO). It puts businesses at risk of non-compliance, leading to fines, loss of credibility, and operational disruption. But knowing UBO regulations comprehensively and their importance can help you save your business and improve its reputation.
Please note that not all businesses in the UAE need to comply with AML and CFT regulations, however, all businesses must comply with UBO regulations in the UAE.
Jitendra Chartered Accountants, JCA, helps you understand and comply with various provisions of AML and CFT regulations in UAE, including UBO regulations.
What Is Ultimate Beneficial Ownership or UBO in UAE?
UBO or Ultimate Beneficial Ownership, refers to the ultimate owner or controller of a company. Such a person might not always appear on official documents like a business license. A UBO could be an indirect owner through intermediaries or a direct shareholder, or even a person exercising control over the company.
For example, if a person holds 25 per cent or more of a company’s shares or voting rights or exercises control over its management, he would typically be qualified as a UBO. All businesses operating within the UAE are obliged to identify and disclose such individuals in UBO registers for transparency. Moreover, all DFNBPs, FIs, VASPs, and NPOs are obliged to identify UBOs of their customers for proper due diligence measures.
In a nutshell,
- All businesses in the UAE must identify their UBOs.
- The UBOs’ information must be kept in a UBO register, which should be protected from damage or loss.
- The UBO register must be shared with the company registrar and relevant authorities.
- The register must include information about UBOs like names, addresses, shares held, authority given, etc. including the latest contact details and address
- The register must be updated continuously.
- The register must be kept for as long as the company exists and five more years after the liquidation of the company.
Why Do UBO Regulations in UAE Matter?
UBO regulations play an important role in fighting financial crimes, which include money laundering, tax evasion, and terrorism financing. Here is why:
- Transparency: It prevents the misuse of corporate structures, knowing who actually owns or controls a business.
- Risk Management: Businesses and institutions can understand the ownership details to assess potential risks better.
- Legal Compliance: Abiding by UBO regulations helps businesses align with international standards and avoid fines.
- Trust Building: Clear disclosure of UBO enhances investor, partner, and other regulatory authority trust.
Key UBO Regulations in the UAE
The UAE has established specific law to regulate UBO disclosures:
- Cabinet Decision No (109) of 2023 regarding regulating the procedures of the beneficial owner
Additional regulations, such as the AML and CFT laws in UAE, emphasize verifying UBO data regularly of their customers.
Who Qualifies as a UBO in UAE?
UBOs can include:
- Direct Owners: Individuals holding shares directly.
- Indirect Owners: Those owning shares via intermediaries.
- Controllers: People with influence over company decisions without direct ownership.
- Economic Beneficiaries: Those profiting from the company’s activities indirectly.
- Trustees and Nominees: Representatives holding shares on behalf of others must disclose the real beneficiary.
Business Structures and UBO Disclosure
The requirements for the disclosure of UBO vary with the type of business:
- Mainland Companies: Must maintain a current register of UBOs and make it available to the relevant licensing authority.
- Non-financial Free Zone Entities: Must maintain a current register of UBOs and Observe unique UBO rules stipulated by their free zone authority.
- Financial Free Zone Entities: Observe unique UBO rules stipulated by their financial free zone authority.
- Offshore Companies: Must maintain a current register of UBOs and These are governed by both local and international requirements for UBO, with available records to be presented to relevant authorities.
UBO Responsibilities for New Businesses in UAE
New businesses within the UAE are held liable for the following regarding UBO:
- Declare: Declare correct UBO to the licensing authority
- Record Keeping: Keep updated, accurate records of UBOs.
- Reporting: Submit correct UBO information to licensing authorities and update in case of changes.
Consequences of Non-Compliance with UBO regulations in UAE
You can encounter many troubles as the ultimate consequence of non-compliance;
- Financial Sanctions: Heavy fines to deplete resources.
- Operational Restrictions: Your business licenses may be suspended or revoked.
- Reputational Damage: You may lose the trust of clients, partners, and investors.
Benefits of UBO Compliance in UAE
You get the following benefits by ensuring compliance with UBO regulations
- Enhanced Reputation: Transparent ownership is attractive to more investors and partners.
- Legal Protection: Being in compliance will help protect a company from any penalties or legal complications.
- Increased Credibility: Demonstrating ethical practices boosts confidence among stakeholders.
How to Stay Compliant with UBO regulations in UAE?
- In order to be compliant, all businesses in the UAE need to;
- Declare UBOs with the relevant authority.
- To maintain accuracy, update records regularly.
Business operations are thus smooth while observing UAE laws.
Why Choose Jitendra Chartered Accountants?
Jitendra Chartered Accountants, JCA, helps you comprehensively understand various AML, CFT and UBO regulations in UAE. Our experts will provide you with the right guidance you need to avoid noncompliance. Our experts help you monitor your business and financial activities and transactions to make sure that you stay away from the risks of financial crimes.
