Ultimate Beneficial Owner (UBO) In UAE: All You Need to Know

What is the Ultimate Beneficial Owner (UBO)?

In simple terms, the Ultimate Beneficial Owner (UBO) is the person who ultimately owns or controls a company, even if they are not the one listed on the business license.

This could be a shareholder, partner, or anyone who has significant influence over the company. UAE regulations require all businesses, whether in mainland Dubai or free zones, to keep track and report their UBOs to ensure transparency and prevent misuse.

Understanding Dubai’s UBO Regulations and What They Mean for Your Business

Dubai, as a leading global business hub, has introduced important regulations regarding Ultimate Beneficial Owners (UBOs) to ensure transparency and integrity in business operations. These rules require businesses to clearly identify and disclose their true owners—those who ultimately control or benefit from the company.

For business owners in Dubai, knowing and following these UBO regulations is crucial. Failing to comply can result in significant penalties, including fines and restrictions on your business activities. On the flip side, adhering to these regulations can enhance your company’s reputation and credibility, making it more attractive to investors and partners.

Fun Fact: The concept of UBOs is not just limited to the UAE; many countries around the world have similar regulations to promote transparency and combat financial crimes!

Why Identifying UBOs is Important

Identifying UBOs plays a crucial role in preventing financial crimes like money laundering, terrorism financing, and corruption.

Here’s why UBO identification matters:

• Enhances Transparency: Knowing the individuals behind a business helps prevent illicit activities hidden within complex corporate structures.
• Mitigates Risks: Financial institutions can better assess risks and avoid transactions linked to criminal activities.
• Ensures Compliance: Following UBO regulations helps businesses comply with international standards and avoid legal penalties.
• Supports Law Enforcement: Clear UBO information aids in tracking and prosecuting financial crimes.

Types of Individuals/Entities Considered UBOs

UBOs can include a variety of individuals and entities:

1. Direct Owners – Individuals who directly hold shares in a company.
2. Indirect Owners – Persons owning shares through intermediary entities.
3. Controllers– Individuals who control the company through means other than direct ownership, such as significant influence.
4. Economic Beneficiaries– Those who benefit financially from the company’s operations without direct ownership.
5. Trustees and Nominees– Individuals holding shares on behalf of others must disclose the ultimate beneficiary.
6. Senior Management– In some cases, senior managers may be considered UBOs if they have significant decision-making power

Dubai’s Legal Framework for UBO Disclosure

Dubai has established clear rules for businesses to disclose who their real owners are. Here’s a simple breakdown of the key regulations:

1. Federal Decree-Law No. 20 of 2018: This law requires businesses to keep accurate and up-to-date records of their Ultimate Beneficial Owners (UBOs) and report this information to the authorities.
2. Cabinet Decision No. 58 of 2020: This decision provides detailed procedures for how businesses should maintain and submit UBO information. It applies to all entities in the UAE, except those fully owned by the federal or local government.

Relevant Regulations Include:

Dubai Economic Substance Regulations (ESR): These rules require businesses in certain sectors to have a genuine presence in Dubai. They also include requirements for detailed record-keeping, which ties into UBO disclosure.

Anti-Money Laundering (AML) Laws: Dubai’s strict AML laws require businesses to regularly update their UBO information, report suspicious activities, and follow guidelines from the UAE Central Bank and Financial Intelligence Unit (FIU).

Dubai’s legal framework ensures businesses are transparent about their owners and maintains rigorous standards for record-keeping and reporting.

Compliance Requirements for UBO Disclosure Based on Business Structure

UBO disclosure requirements vary depending on the type of business structure in Dubai. Here’s a simple overview of what’s required for different types:

Mainland Companies

Mainland companies must keep a register of their UBOs at their main office. They need to submit UBO information to the relevant licensing authority and update it whenever there are changes. It’s essential that this information is accurate, current, and available to regulatory authorities.

Free Zone Entities

Companies operating in Dubai’s free zones must follow the UBO disclosure rules set by their specific free zone authorities. These free zones usually have their own systems for submitting and updating UBO information.

Offshore Companies

Offshore companies must meet both local UBO regulations and international standards. They are required to provide UBO details to the offshore registrar and ensure that their records are kept accurate and up-to-date.

Fun Fact: Free zones in Dubai are known for their business-friendly regulations. Understanding their specific UBO requirements can give you a competitive edge!

Responsibilities for New Businesses in Dubai

If you’re setting up a business in Dubai, here’s what you need to do:

1. Due Diligence: Conduct thorough checks to identify UBOs. Collect shareholder information, perform background checks, and verify identities.
2. Record Keeping: Keep accurate, up-to-date records of UBOs, including their ownership interests and control mechanisms
3. Reporting: Submit UBO information to relevant authorities like the Dubai Economy and Transportation (DET) and keep it updated.
4. Compliance Programs: Implement compliance programs to continuously monitor and review UBO information. Train staff on UBO regulations and ensure your systems are equipped to handle this data.
5. Legal Obligations: Follow all local and international UBO regulations to avoid penalties and legal issues.

How to Comply with UBO Regulations in the UAE?

Obtain a UBO Certificate

This certificate confirms that your entity complies with UBO rules and maintains accurate records of its beneficial owners.

Follow Proper Procedures

At onboarding or when forming new business connections, ensure you collect and verify information about all individuals with substantial ownership or control.

Maintain Accurate Information

Regularly update and verify UBO information to avoid penalties and maintain client confidence.

Penalties for Non-Compliance

Failing to comply with UBO regulations can have serious consequences:

• Businesses may face substantial fines for non-compliance. These fines can significantly impact financial health.
• Non-compliance can lead to legal actions, including court cases and restrictions on business operations. In severe cases, business licenses may be suspended or revoked.
• A tarnished reputation can result in a loss of customers, partners, and investors.

Understanding and complying with UBO regulations is vital for setting up and running a successful business in Dubai. By ensuring transparency and adhering to local laws, you protect your business from financial and legal troubles and contribute to a cleaner business environment.

For more information or assistance with UBO compliance, connect with our Global Network of professional partners. At IFZA, UBO compliance is an integral part of the setup process. We ensure that all IFZA-registered businesses remain compliant and align with Dubai’s vision for a transparent and robust business sector.