What is a beneficial owner?
A beneficial owner is the natural person who ultimately owns or controls a customer entity, or the person on whose behalf a transaction is being conducted. Identifying beneficial owners is a cornerstone of AML compliance because money launderers frequently use corporate structures, trusts, and nominee arrangements to conceal their identity and the origins of their funds.
Legal framework
Beneficial ownership rules come from the FATF standards and are written separately into EU and UK law.
EU requirements
The EU's AML Directives require member states to maintain centralised beneficial ownership registers and set a threshold of 25% ownership or control for identifying beneficial owners. The new EU AML package strengthens these requirements with enhanced access provisions and cross-border interconnection of registers.
UK requirements
The UK's People with Significant Control (PSC) register, maintained by Companies House, requires UK companies to identify and register persons with significant control - defined as holding more than 25% of shares or voting rights, or otherwise exercising significant influence.
Challenges in identifying beneficial owners
Complex ownership structures involving multiple layers of entities, trusts, and nominees make beneficial ownership identification particularly challenging. TCSPs and legal professionals involved in entity formation must be especially diligent, as they may be creating the very structures that obscure beneficial ownership.
Once identified, beneficial owners should be screened against sanctions lists as part of the CDD process. FirmScreen enables screening of both direct customers and their beneficial owners.
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