Most definitions of the term “ultimate beneficial owner” are based on guidelines from the FATF:
Ultimate Beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement. Reference to “ultimately owns or controls” and “ultimate effective control” refer to situations in which ownership/control is exercised through a chain of ownership or by means of control other than direct control. This definition should also apply to beneficial owner or a beneficiary under a life or other investment-linked insurance policy.
The EU’s Fourth Anti-Money Laundering Directive (MLD4) also substantially addresses ultimate beneficial ownership. Under MLD4, ownership or control of more than 25% of the shares or voting rights in a legal entity assumes ultimate beneficial ownership. MLD4 also allows for senior managing officials to be treated as beneficial owners in cases where the above criteria cannot be determined. Additionally, MLD4 stipulates that EU countries require entities in their jurisdiction to keep up-to-date ownership information in a central registry that is accessible to authorities, obliged entities, and public persons with a legitimate interest, such as journalists or NGOs.
The following data points can be used in determining beneficial ownership:
- Shareholdings and subsidiaries
- Direct and indirect ownership
- Ultimate owner
- Actual and perceived independent of the company
- Corporate group, all companies with the same ultimate owner as the subject company
- Company tree diagrams
- Beneficial ownership vs. perceived ownership
- Assessing ownership via top down or bottom up approaches
- Varying definitions of ownership