The Role of AI in Enhanced Beneficial Ownership Structures


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Artificial intelligence (AI) tools can help in the complex world of beneficial ownership. It can help in identifying valuable ownership structures.

The world of global finance is very complex. Its layers of beneficial ownership structures can be very confusing. These may lie several levels below the surface of declared shareholders and registered company names.

Clear information on beneficial ownership structures is critical for promoting economic equity and transparency. It is essential for financial integrity as well.

It also helps reduce tax evasion, combat money laundering and terrorist financing. Exposing these hidden layers of ownership, however, takes time and effort.

Tracking beneficial ownership can be challenging and costly. It needs skilled resources that are costly. This is especially so in modern financial arrangements in the highly connected global economy.

Complicated ownership histories, inconsistent international laws, and myriad corporate legal frameworks make the task more difficult. Traditional ways of getting this information often have limitations. These may only deliver incomplete insights and possible blind spots that allow illegal activities to go on.

AI can be a potent tool for negotiating this complex maze. It can help to reveal beneficial ownership structures cost-effectively.

It offers sophisticated data processing, pattern recognition, and predictive analytics capabilities. These could provide clear solutions to the difficult problem of beneficial ownership transparency.

These tools could improve the financial sector, and its capacity to create an equitable playing field for all in the economy.

What is regulatory technology? 

Regtech- regulatory technology – could help to automate regulatory compliance. Over the last few years, the demand for regtech solutions has significantly increased. This is because these tools play a proactive role in increasing efficiency.

According to forecasts, within the next five years, the regtech industry will reach a value of almost  $30 billion.

Some companies have already used these technologies to automate ultimate beneficial ownership discovery for global financial firms.

Importance of regtech for ultimate beneficial ownership

A clear insight into ultimate beneficial ownership (UBO) structures is the most difficult challenge in AML compliance. Shareholder structures comprised of unclear networks spanning geographies can be difficult to understand.

The shareholder information typically consists of unstructured data. This makes the job even tougher since businesses need to work on this data to file documents constantly. This documentation also needs to be consistent.

Compliance teams traditionally needed to sort through piles of forms with inconsistent designs and formats. The result was incomplete information and very poor insights.

Regtechs quickly understood that a tech- innovation only could simplify this difficult task for compliance teams. That is the main reason for this spike in demand for regtech tools.

Unmasking beneficial ownership structures using AI

AI can help in the complex world of beneficial ownership. It helps in uncovering valuable ownership structures.

Advanced data processing, ML, pattern recognition, and predictive analytics work well together to enable AI to identify the frequently hidden channels. They could point to the owners’ identity once these are out in the open.

These systems can connect various datasets and find patterns hidden from the naked eye. They can learn and adjust, which helps them improve their detection abilities over time.

If done manually, the process would be difficult, time-consuming, and prone to human error. But since AI systems can sort through vast amounts of data, they can simplify and speed up complex processes. This makes them an essential tool in this process.

There are several ways in which AI can reveal beneficial ownership. AI first streamlines data integration and collection. It gathers information for analysis from several sources, including company registries, financial databases, and publicly accessible data. 

Then, it works on entity resolution and relationship mapping. It can identify instances where records from various datasets refer to the same entity.

The tool can then connect entities, such as shared directorships or addresses, to build a complete picture of ownership structures.

As a result, AI can significantly contribute to risk evaluation, anomaly detection, and predictive analysis.

It can:

  • recognize patterns that indicate risk
  • identify anomalies that deviate from these patterns
  • forecast potential non-compliant behaviors
  • utilize machine learning algorithms

Natural language processing (NLP) can also help to uncover insightful information about beneficial ownership.

The tool extracts and processes pertinent data from large amounts of unstructured text. These could be in the form of legal documents or news articles.

Additionally, AI enables the automation of compliance procedures. It reduces the dependence on human resources and accelerates efforts to disclose beneficial ownership.

The adoption of AI is not easy, though. Data privacy, security, and the possibility of bias are important functionalities that need skill sets to master.

However, the advantages AI offers in exposing beneficial ownership structures far outweigh the challenges.

AI-powered beneficial ownership unmasking: Challenges and ethical considerations

Companies need to understand and navigate AI’s potential challenges and ethical considerations. Its use also brings up bias, data privacy, and security issues that firms must address immediately.

Today, this has become critical for enterprises to use AI. It has become critical for simplifying many business processes, including the one in this context. One of its biggest strengths is its ability to increase the effectiveness and accuracy of any process.

1. Data security and privacy:

AI systems collect and process enormous amounts of data, frequently from numerous sources. This creates a greater risk for data security.

Using sensitive and personal data requires strong privacy protection rules. companies also need to comply with laws like the GDPR. These laws mandate that businesses must ensure they have the right permissions before using data.

2. Algorithmic bias:

The potential for biased practices, is a significant concern. If the data used to train the AI system is limited or favors particular outcomes, bias may start to show.

Fintechs must regularly test and adjust AI algorithms. They must focus on fairness and transparency to mitigate this bias.

3. Accuracy:

AI systems can process enormous amounts of data simultaneously. But there may be some variation in their capacity to interpret and analyze data correctly.

False positives or negatives in risk assessment are just two examples of mistakes AI tools can make. These can have serious repercussions. So, firms must regularly check, audit, and update AI systems to maintain reliability.

4. Legal and regulatory observance:

Applying AI to reveal beneficial ownership also should confirm to the current legal and regulatory frameworks.

This process includes data usage and privacy laws, know-your-customer (KYC) requirements, and anti-money laundering (AML) law

5. Use of AI ethically:

Beyond the technical and legal considerations, the ethical bias of AI should also be a focus. The process entails applying AI to uphold fairness, support human rights, and benefit society.

It includes accountability for decisions made using AI and the ability for human review. Firms also need intervention and transparency regarding the use of AI.

Businesses can overcome these obstacles by:

  • creating centralized, no-code AML compliance
  • fraud prevention platforms that utilize AI
  • ensuring robust data protection
  • compliance with legal and ethical standards

Also Read: Why Risk Management Is Crucial to Fintech brands AML Compliance

Fintechs can achieve AI-powered identification of beneficial ownership structures. They only need to work in a way that respects privacy, fosters fairness, and strengthens financial integrity.

For a financial institution, the true ownership of a new corporate client often lies beneath numerous layers of intricate internal structures. It often spans countries and may be a part of other legal entities.

It could take a long time to identify ownership structures by only manual research to locate beneficial owners. Even if located, this data will be difficult to process because it will be available in varying formats. This is because various jurisdictions worldwide provide the necessary information in multiple formats and with varying degrees of access.

Due to this, many industries rely on regulatory technology. It helps convert their internal operations from paper-based to fully digital ones. Then AI tools can work easily on these databases.

The ultimate objective is to use regulatory technology to transform the cost of compliance into a competitive advantage.

Swapnil Mishra
Swapnil Mishra
Swapnil Mishra is a global news correspondent at TalkCMO, with over six years of experience in the field. Specializing in marketing technologies, Swapnil has established herself as a trusted voice in the industry. Having collaborated with various media outlets, she has honed her skills in content strategy, executive leadership, business strategy, industry insights, best practices, and thought leadership. As a journalism graduate, Swapnil possesses a keen eye for editorial detail and a mastery of language, enabling her to deliver compelling and informative news stories. She has a keen eye for detail and a knack for breaking down complex technical concepts into easy-to-understand language.


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