Sanctioned Beneficial Ownership (SBO) Screening: How to Streamline UBO Investigations
Ultimate Beneficial Ownership (UBO) investigations are a critical component of Know Your Customer (KYC) / Know Your Business (KYB) screening and Third-Party Risk Management (TPRM) for financial institutions and corporations with global supply chains. Companies must identify the beneficial owners of suppliers, customers and other third-parties to identify hidden compliance risks across sanctions, political exposure, links to forced labor and more. UBO investigations mitigate the risk of illicit activities hidden within complex corporate structures.
However, beneficial ownership investigations are time-consuming and can overwhelm compliance teams. By leveraging high-risk ownership databases that cover Sanctioned Beneficial Ownership (SBO), firms can address this issue and instantly identify risk exposure while allowing low-risk counterparties to be onboarded quickly. This ensures compliance teams can focus their resources on deeper investigations only when necessary, saving time and eliminating unnecessary operational delays.
In this article, we’ll cover the difference between high-risk and sanctioned ownership screening and UBO investigations. We’ll also highlight how Castellum.AI helped a global supplier cut their vendor onboarding process from weeks to under 30 minutes with automated screening for high-risk and sanctioned ownership.
Understanding SBO and High-Risk Ownership screening
Sanctioned Beneficial Ownership screening is the first step in ownership due diligence. This automated process quickly identifies risks associated with individuals or entities that are linked to sanctioned entities through ownership networks, corporate directorships or transactions and trade relationships. It screens for ownership stakes, control mechanisms and chains of ownership to reveal ties to sanctioned parties. Similarly, screening on High-Risk Ownership (HRO) identifies corporate network linked to export control violations, forced labor and other illicit activities.
SBO screening immediately identifies high-risk individuals and entities to reduce the number of detailed investigations, enabling teams to focus their enhanced due diligence efforts where warranted.
Screening for Sanctioned Beneficial Ownerships enables teams to uncover various high-risk ownership status in a single search:
50% rule compliance: SBO screening consolidates ownership data from corporate registries and sanctions lists, mapping all links to sanctioned individuals and entities throughout high-risk corporate networks. This enables teams to comply with US and EU 50% Rule requirements without additional investigations.
Other High-Risk Ownership: Beyond sanctioned ownership, SBO screening can be paired with screening against other compliance risks, including sanctioned trade relationships, links to forced labor, or involvement in export control violations.
Ongoing monitoring: SBO screening provides immediate alerts for changes in risk exposure due to modifications in ownership associated with a customer or supplier.
Related: Sanctioned Beneficial Ownership Best Practices
Understanding UBO investigations
When initial screenings raise red flags or regulatory mandates involve Enhanced Due Diligence (EDD) on higher-risk suppliers, vendors, clients or business counterparties, UBO investigation helps organizations identify the hidden beneficial owners and associated risks to prepare for more accurate risk mitigation.
Beneficial ownership investigations identify the same risks as SBO and HRO screening, but the process is manual, requiring deep dives into corporate records and registration filings. Contrary to SBO screenings, beneficial ownership investigations accomplishes much the same — identifying and validating risk through ownership networks. involve a deep dive into ownership structures—including a detailed examination of the background and activities of the beneficial owners.
The investigation process includes:
Comprehensive research and analysis of ownership structures: Thoroughly investigating individuals or entities, including their financial history, business affiliations and potential connections to illicit activities. It may also extend to employing forensic accounting techniques to uncover hidden ownership, financial discrepancies and red flags.
Cross-verification with external databases: Collecting corporate record data directly from issuing authorities and external databases to verify information provided by a subject, or engaging specialized intelligence services to gather additional information.
Risk evaluation and compliance strategy: Examining jurisdictional requirements, such as beneficial ownership disclosures and reporting obligations in addition to publicly available ownership information. Legal and compliance experts help firms interpret these factors to inform risk mitigation strategies and compliance actions.
How SBO screening reduces investigation load
High-risk and sanctioned beneficial ownership screening does not replace detailed investigations, but greatly reduces the number of full investigations required. Starting UBO due diligence with thorough screening allows firms to:
Immediately identify risks
If a firm needs to onboard 50 suppliers across different jurisdictions, a comprehensive UBO screening tool can flag high-risk owners and trace ownership back to sanctioned entities early on. This allows firms to clear low-risk vendors in minutes and avoid week-long investigations on each new vendor that often leads to unnecessary operational delays.
Minimize resource expenditure
UBO investigations are thorough but time-consuming. Screening speeds up the compliance process and keeps resources focused only on high-risk cases. In the above example, the firm only needs to investigate the 5 high-risk vendors flagged by the screening process, instead of all 50. This saves both time and money on low-risk cases.
How Castellum.AI improved vendor screening for a global manufacturer
TL;DR: One of Castellum.AI's clients previously spent between three days and four weeks manually investigating each suppliers’ ownership details as part of their vendor due diligence process during onboarding. With Castellum.AI’s automated screening solution, they now identify and resolve beneficial ownership alerts in less than 30 minutes.
The problem
The client struggled with a slow and cumbersome ownership investigation process. Like many in the industry, they relied on manual methods, which required extensive desktop research, manual screening and external requests for information. This approach often dragged on for days or even weeks. Not only was it inefficient, but it also exposed the client to significant compliance risks.
Challenges faced
Inefficient research: Desktop research involved basic Google searches, reviewing legacy corporate records databases and accessing government registries. In most cases, it returned no useful information.
Delayed responses: When the research was inconclusive, the client faced two choices:
Request proof from suppliers: They sent a request for proposal (RFP) to the supplier seeking proof of beneficial ownership. This often took days or even weeks to receive. In jurisdictions like Cyprus, where beneficial ownership cannot be compelled, UBO checks were more complex and time-consuming.
Engage risk consultants: They hired due diligence firms to outsource in-depth ownership investigations. However, the lengthy approval process often pushed back the investigation by several weeks.
Inadequate alerts: Their manual systems didn’t provide alerts to any changes in risk exposure. The absence of active monitoring exposed the client to additional risks.
The Castellum.AI solution
The client wanted to adjudicate high-risk ownership alerts within 10-30 minutes. Here's how we helped:
Reduced investigation load: With Castellum.AI’s automated SBO screening solution, the client eliminated the need for extensive investigations on every supplier, reducing the average duration of vendor onboarding from weeks to minutes.
Automatic screening: We offered automatic screening across sanctions, PEPs, adverse media and beneficial ownership for global compliance coverage with fewer false positive alerts.
Integrated platform and streamlined workflow: We consolidated all risk-related data into a single platform, so analysts no longer had to switch between different systems. We also enabled them to quickly review alerts and escalate cases for further investigations within a unified workflow, streamlining the vendor onboarding and monitoring process.
Real-time monitoring and automated risk flagging: Our solution automatically flagged changes in third-party risks, allowing the client to stay updated on vendor risk status without manual intervention.
Improve UBO screening accuracy with Castellum.AI
Castellum.AI’s consolidated SBO screening identifies sanctioned ownership, forced labor, export control and other network risks across individuals, entities, vessels, aircraft and more. You can conduct risk-based screening with 80+ ownership and geographic risk filters to tailor screening according to your specific risk exposure.
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