Introduction
With updated regulations and a growing focus on transparency, the UAE is enhancing how businesses identify and manage financial crime risks, especially around complex ownership structures and foreign entities. For DNFBPs, this means giving greater attention to uncovering the true beneficial owner behind every client, even when nominees or intermediaries are involved.
Knowing who truly controls a company, especially where foreign structures or nominees are involved, is a major challenge. For DNFBPs in the UAE, identifying the Ultimate Beneficial Owner (“UBO”) is not just a regulatory step; it is essential for protecting your business from misuse. Shell companies, intermediaries, and even relatives may be used to conceal the real person in charge. DNFBPs therefore need simple, practical tools to uncover who is really behind the scenes.
The Challenge of Hidden Owners (Nominees & Layers):
Foreign legal persons and legal arrangements, such as trusts or foundations, can make it more difficult to identify who truly controls them. In some cases, a company may be owned by another entity based in an offshore jurisdiction, or the listed owner may be a relative or another person not actively involved in the business. This may indicate the use of a nominee, being someone who acts on behalf of another person to conceal the true owner. These structures increase risk, especially where the real decision-maker is kept out of sight.
This represents a major vulnerability in global efforts to curb untraceable shell companies. UAE regulators and international standards (such as those of FATF) now stress beneficial ownership transparency, expecting DNFBPs to trace through layered corporate structures to identify the ultimate natural person owner. In short, DNFBPs need to go beyond the surface. Below are some practical steps to help uncover the UBO, especially when dealing with complex or foreign structures where nominees or intermediaries may be misused.
Practical Steps & Regulatory Guidance to identify the UBO
Map Out the Ownership Structure:
Start by collecting the ownership details of your client’s legal entity. Request an official ownership chart or other documentation showing who owns what. Identify any individual who directly or indirectly holds a significant stake (25% or more is a common threshold in many regulations).
Don’t stop at the first layer; trace through all intermediate entities (holding companies, trusts, etc.), as well as any nominee shareholders, until you reach the natural person(s) who ultimately own or control the entity.
This may involve reviewing shareholder registers, certificates of incumbency, trust deeds, or other records from foreign registries. The goal is to draw a clear line from the customer entity to a natural person who exercises ultimate ownership or control.
Identify Who Has Effective Control:
Ownership percentage is not the only indication of who is in control. Look for the person who exercises effective control. If no one meets the 25% ownership test, or the ownership info is unclear, consider who may exercise control through other means.
This could be someone with veto power, special voting rights, or a significant influence over the arrangement. For example, when dealing with a trust or similar legal arrangement, identify the settlor (founder), the trustees, the beneficiaries, and any protectors, as these are the persons who may effectively control or benefit from the assets.
The true UBO is the person who ultimately exercises control or derives the benefits, even if they are not formally listed as a major shareholder. If no individual can be identified through ownership or other means of control, the top managing official (e.g. the CEO or managing partner) should, as a last resort, be identified as the person exercising effective control. This ensures that a natural person is always identified for your records.
Watch for Red Flags of Nominees:
Be alert where the purported owners or directors do not match the profile of someone truly in control. Are they very young, a family member, or someone with no apparent business background? Are they disinterested or unaware of details a real owner should know? Such informal nominees (e.g. spouses, children, or associates not involved in the business) are a significant red flag.
Nominee directors or shareholders may merely serve as fronts, while the real principal remains hidden. If you suspect that a nominee or intermediary is involved, do not hesitate to ask direct questions. For instance, ask the client: “Are you acting on behalf of someone else?” or “Is there any agreement under which another person benefits from these shares?”. Under the updated FATF guidance, many jurisdictions increasingly require nominees to declare their nominator (the person on whose behalf they are acting) and that person’s identity.
While UAE DNFBPs may not have the legal power to compel such disclosure, you can request a written declaration from the client confirming who the ultimate beneficial owner is, especially where the circumstances appear suspicious.
Dig Deeper with Enhanced Due Diligence:
If the ownership information is unclear, complex, or from a high-risk foreign jurisdiction, apply Enhanced Due Diligence (EDD). This means taking additional steps to verify and validate the details you have been given. Request further supporting documents, such as official certificates from foreign company registries, trust deeds, nominee agreements, and powers of attorney – anything that may shed light on who is behind the entity. Key information should also be independently cross-checked where possible. For example, some countries maintain public UBO registries or company databases that can be searched.
You can also perform open-source checks on the individuals and companies involved. The UAE’s latest guidance indicates that clients with complex ownership structures or cross-border links should be treated as higher-risk, thereby triggering EDD measures. In practice, EDD may include in-depth open source research, obtaining professional third-party verification services, or even politely requesting to speak directly with the purported UBO by call or meeting. Any discrepancies or evasive answers should be documented, as they may become important where a pattern of concealment is identified.
Escalate or Pause if Necessary:
Sometimes, despite all reasonable efforts, you may still be unable to form a clear picture of who the UBO is. The client may be unwilling to provide the necessary information, or the structure may be overly convoluted without any transparent justification. In such cases, do not yield to pressure to onboard or proceed with the transaction. Escalate the matter to senior management for guidance.
It is important, from an internal perspective, to flag that ownership is not clear, as this may affect the client’s risk rating or even lead to a decision to reject the business relationship. It is better to pause or refuse a relationship than to unknowingly facilitate money laundering. UAE regulators expect DNFBPs to maintain strong internal controls and escalation pathways for such matters.
If the unclear ownership gives rise to suspicion, you may need to consider filing a Suspicious Activity Report (SAR) to the UAE’s Financial Intelligence Unit (“FIU”). At the very least, onboarding should be put on hold until you can confidently answer the question: “Who is the ultimate beneficial owner?”. Exercising caution at that stage can help protect your firm from regulatory exposure and reputational harm.
Pay Attention to Politically Exposed Persons (“PEPs”):
Politically Exposed Persons, including foreign officials, senior executives of state-owned companies, and individuals with prominent public functions, are not inherently high-risk, but they require closer scrutiny. PEPs, or persons connected to them, may be misused to move illicit funds or to facilitate undue influence.
When a client, beneficial owner, or controller is identified as a PEP, or as a family member or close associate of one, UAE regulations require DNFBPs to apply enhanced due diligence. This includes obtaining senior management approval before onboarding, verifying the source of wealth and funds, and applying ongoing monitoring. Risk is not determined solely by the individual’s title; consideration should be also given to the nature of their role, the origins of their funds, and any connections to high-risk jurisdictions.
Vigilance in relation to PEPs helps protect your firm from reputational harm and regulatory risk. As with complex ownership structures, the key question remains: “Who is really behind this client, and what risk might they present?”
In addition to the practical steps outlined above, UAE Cabinet Resolution No. 109 of 2023 requires legal entities to identify and maintain accurate and up-to-date information on their ultimate beneficial owners, including keeping a dedicated register of the natural person(s) who ultimately own or control the entity. The resolution also requires disclosure of nominee shareholders and directors, including the identity of the person on whose behalf they act, to prevent the use of companies, nominee arrangements, or layered ownership structures to conceal the true beneficial owner or actual controller. Such information must be maintained, kept up to date, and made available to the relevant authorities upon request, and failure to comply may result in regulatory consequences. For DNFBPs, this highlights the importance of independently verifying UBO information and not relying solely on client declarations.
Conclusion: Keep it Practical and Transparent:
Unmasking the true beneficial owner behind foreign companies or complex arrangements can feel like detective work, but it is a non-negotiable part of a DNFBP’s AML/CFT duties. The key is to remain inquisitive and cautious: Do not accept vague answers or complicated charts at face value. Ask further questions, verify details, and document everything. By being proactive and applying these practical steps, UAE DNFBPs can meet regulatory expectations without drowning in legalese.
Remember, the aim is simple: know who you are really dealing with. When you identify the real person in control, you not only comply with the law and FATF best practices, but also protect your business and the UAE’s financial system from abuse.
Ultimately, a transparent business relationship is a safer and more sustainable one for all parties involved. Remain vigilant, and do not hesitate to pause the relationship if something does not add up – effective compliance is about quality, not merely a box-ticking exercise.
As a result, the UAE legislator has taken a decisive step in strengthening the national AML/CFT framework through the introduction of Federal Decree-Law No. 10 of 2025, placing enhanced emphasis on transparency, accountability, and the effective identification of ultimate beneficial ownership. This development signals a clear shift towards a more assertive and risk-driven regulatory environment, particularly in addressing the misuse of complex and cross-border structures. Against this backdrop, DNFBPs are expected to move beyond a box-ticking approach and adopt a more rigorous, proactive, and risk-based methodology when identifying and verifying ultimate beneficial owners, especially in higher-risk and multi-layered scenarios.
Finally, in a fast-moving regulatory environment, DNFBPs in the UAE must remain proactive, informed, and risk aware. Understanding who truly controls a client, and being alert to red flags such as complex structures, nominees, or PEP connections,– is not just a matter of good compliance; it is also sound business practice. With the right tools, vigilance, and guidance from UAE authorities, firms can meet their AML/CFT obligations and contribute to a more transparent and secure business environment.