Who is considered a beneficial owner (BO) of an entity, a trust, or a legal arrangement?

Definition #

A beneficial owner (BO) is any individual who ultimately owns or controls an entity, a trust, or a legal arrangement, or on whose behalf transactions are conducted. This includes:

  • Entities (such as corporations or partnerships): The beneficial owners are those individuals who directly or indirectly own more than a specified percentage of shares or voting rights (commonly 25% or more based on FATF recommendation) or who otherwise exercise control over the management and decisions of the entity.
  • Trusts: For trusts, the beneficial owners are the settlor(s), the trustee(s), the protector(s) (if any), the beneficiaries, or any other individual who has ultimate control over the trust. This also includes individuals who have direct or indirect control over a significant portion of the trust’s assets.
  • Legal Arrangements other than trusts: The beneficial owner(s) include persons in equivalent or similar positions as those in trusts, depending on the nature of the legal arrangement.

Importance of Identification #

Identifying beneficial owners is crucial for complying with global and local anti-money laundering (AML) regulations and combating the financing of terrorism (CFT). Knowledge of the beneficial ownership of entities, trusts, and other legal arrangements helps prevent misuse of these structures for illicit purposes, such as evading taxes, hiding assets, or funding illegal activities.