Identifying Ultimate Beneficial Owners: A Risk-Based Approach to Improving the Transparency of International Financial Flows

Ultimate Beneficial Owners (UBOs) are defined by complex legal rules that differ across countries. Identifying UBOs is increasingly costly and time consuming. Gathering more data and refining already complex domestic legal arsenals is not the solution. We therefore propose a risk-based approach to identifying possible UBOs, which is enabled by recent theoretical advances in economics and corporate finance. The proposed methodology is robust, rigorous and cheap to implement. In the same way that a risk-based approach has facilitated the adoption of transparency standards for banks (Basel), this methodology could constitute the basis for the gradual adoption of an international standard.