Most regimes use an ownership threshold, commonly 25 percent, plus a control test, and a fallback to senior management if no owner is found. Identifying the beneficial owner is a core element of customer due diligence and a key defence against shell-company abuse.
Example
Company A is 60 percent owned by Company B, which is 50 percent owned by Maria. Maria indirectly owns 30 percent of Company A and is a beneficial owner at a 25 percent threshold.
Where it appears in the exams
This topic is relevant for CAMS, CFCS, CGSS.
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Beneficial ownership explained: the 25 percent test, control, registers and shell companies
Related terms
- Shell company: A shell company is a legal entity with no real operations, employees or assets of its own, often used to hold assets or move money without revealing who owns it.
- Customer due diligence (CDD): Customer due diligence is the set of checks a firm does on a customer: identify and verify them, identify the beneficial owner, understand the purpose of the relationship, and monitor it over time.
- Politically exposed person (PEP): A politically exposed person is someone who holds, or has held, a prominent public function, such as a head of state, minister, senior judge, senior military officer or executive of a state-owned company.
Source: FATF Recommendations 10, 24 and 25. Independent explanation for study purposes, not legal advice.