Beneficial ownership

In domestic and international commercial law, a beneficial owner is a natural person (or persons) who ultimately owns or controls an interest in a legal entity or arrangement, such as a company, trust, or foundation. Legal owners (i.e. owners of record), commonly described as registered owners, may hold those interests as beneficial owners or for the benefit of someone else, in which case they may be described as nominees.

Beneficial owners hold specific property rights (use and title) in equity that belong to them, even though legal title to the property belongs to another person. A beneficial owner is subject to a state's statutory laws regulating interest or title transfers. This situation commonly occurs when the person who holds the legal title to a property or asset is considered to have inherent responsibilities, similar to those of a trustee, toward the individual who benefits from the property. A common example of a beneficial owner is the true owner of funds held by a nominee bank.

In March 2019, an Inter-American Development Bank (IADB) report defined beneficial owners as "always natural persons who ultimately own or control a legal entity or arrangement, such as a company, a trust, a foundation, etc." According to the United States' Securities Exchange Act, a beneficial owner of a security includes any person who, directly or indirectly, has or shares voting or investment power.

The terms 'ultimately owns or controls' and 'ultimate effective control' refer to situations in which ownership or control is exercised through a chain of ownership or by means of control other than direct control. The Financial Action Task Force (FATF) recommendations are recognized as the global anti-money laundering (AML) and counter-terrorism financing (CTF) standard.

According to the identity verification service Trulioo, the process of identifying ultimate beneficial owners (UBOs) includes: acquiring and verifying accurate company information; determining ownership structures and percentages; identifying beneficial owners to determine if they meet the criteria for UBO reporting; and performing AML and know your customer (KYC) checks for all individuals determined to be a UBO.

A trustee or executor is not normally a beneficial owner of the assets of a trust or estate.^{[citation needed]}

Determining beneficial ownership information is a requirement of the 4th AML Directive in Europe and was required to be implemented by EU member states by June 2017. In the US, similar beneficial ownership disclosures are a part of the FinCEN Customer Due Diligence Final Rule beginning May 2018.

The Beneficial Ownership Data Standard (BODS) has been developed to serve as a conceptual and practical framework for collecting and publishing beneficial ownership data, and enabling the resulting data to be interoperable, more easily reused, and higher quality. A beneficial owner of a Company must be an individual at all times. BODS provides a specification for modelling and publishing information on the beneficial ownership and control of companies. It was created by OpenOwnership, and is provided under an open license for re-use. OpenOwnership is supporting the development of the standard; however, the standard retains its own independent governance through the working group of international experts.