Short answer: the beneficial owner is the real person who ultimately owns or controls a customer, or on whose behalf a transaction is made, even when ownership is held through companies, trusts or nominees. Knowing who that is lets a firm judge risk, screen the right people and avoid being used by shell companies.
Why it matters
Criminals hide behind layers of companies and nominees. Sanctions apply to owners as well as named parties (see the OFAC 50 percent rule). Politically exposed persons often own assets indirectly. For these reasons FATF makes beneficial ownership a core part of customer due diligence (Recommendation 10) and requires countries to make information on the beneficial ownership of companies (Recommendation 24) and trusts and similar arrangements (Recommendation 25) available to authorities.
The two tests: ownership and control
- Ownership. Natural persons who ultimately own more than a set percentage of the entity. Many regimes use 25 percent, though some countries or sectors use lower thresholds.
- Control. If no one meets the ownership threshold, or there is doubt, firms look at who controls the entity by other means, for example through voting rights, board appointments, family ties or informal influence.
- Fallback. If no individual can be identified, the firm records that and, in most regimes, treats the senior managing official as the beneficial owner, while also considering whether the structure itself is a red flag.
Worked example
Company A is owned 60 percent by Company B, 40 percent by Anna. Company B is owned 50 percent by Maria and 50 percent by Peter.
- Anna owns 40 percent of A directly: beneficial owner.
- Maria owns 50 percent of B, which owns 60 percent of A: 50 percent x 60 percent = 30 percent indirectly, so she is a beneficial owner at a 25 percent threshold.
- Peter has the same 30 percent and is also a beneficial owner.
Ownership is multiplied through the chain, not added up by looking only at the first layer. If the same person holds stakes through two routes, add the results.
Registers and rules
- FATF requires countries to ensure adequate, accurate and up-to-date beneficial ownership information is available, and strengthened Recommendation 24 in 2022 to push toward more reliable registers.
- United Kingdom: companies must report people with significant control (PSC), generally those holding more than 25 percent of shares or voting rights or with significant influence, to Companies House.
- European Union: the AML directives require national beneficial ownership registers. In November 2022 the EU Court of Justice ruled that unrestricted public access to these registers is invalid, so access is now more limited.
- United States: banks and other covered institutions must identify beneficial owners of legal entity customers under the CDD rule (25 percent plus one control person). The Corporate Transparency Act created a separate reporting regime to FinCEN, but in March 2025 FinCEN removed the reporting requirement for US companies and US persons, so check the current position before relying on it.
Red flags
- Complex chains across several countries with no business reason.
- Nominee directors or shareholders, bearer shares, or a registered-agent address shared with hundreds of companies.
- Reluctance or inability to say who owns the company.
- Ownership changes just before a transaction or sanctions designation.
- Trusts or foundations used where there is no clear need.
Exam angles
- Calculate indirect ownership by multiplying percentages through each layer.
- A beneficial owner is always a natural person, never another company.
- Control can make someone a beneficial owner with no ownership at all.
- For legal entity customers, identification of beneficial owners is a CDD requirement, not optional.
- Registers help, but firms should not rely on a register alone and must still take reasonable steps to verify.