Beneficial Ownership

Beneficial ownership refers to the natural persons who ultimately own or control a legal entity, regardless of whose name appears on formal documents.

Legal vs. Beneficial Ownership

Appears on documents

• Legal Owner: Yes
• Beneficial Owner: Not necessarily

Registered with state

• Legal Owner: Yes
• Beneficial Owner: Not always

Exercises real control

• Legal Owner: May or may not
• Beneficial Owner: Yes

Receives economic benefit

• Legal Owner: May or may not
• Beneficial Owner: Yes

Why Beneficial Ownership Matters

Without knowing beneficial owners:

• Criminals hide behind shell companies
• Sanctions can be evaded through nominees
• PEPs can obscure their involvement
• Money laundering becomes easier

Determining Beneficial Ownership

Ownership Test

Who owns 25% or more of equity interests? (Threshold varies by jurisdiction—some use 10% or 15%)

Control Test

Who exercises significant control through:

• Voting rights
• Board appointments
• Veto powers
• Management authority
• Other means (contractual, informal)

Regulatory Requirements

CTA: Report owners with 25%+ or substantial control

CDD Rule: Identify and verify 25%+ owners

AMLD5/6: Central registers of beneficial owners

Beneficial Ownership and KYB

Identifying beneficial owners is core to KYB. See UBO Verification for implementation details.

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Related: UBO | BOI | CTA | Shell Company