Introduction
Beneficial ownership transparency means that the ultimate owners of an entity – i.e., the natural persons who control an entity possibly through a web of different companies, trusts, foundations or other entities –, are disclosed through a central public registry. Several countries have recently established national public registries of beneficial owners, and others are currently in the process of implementing beneficial ownership commitments they have made. However, it is essential that all jurisdictions mandate the public disclosure of ultimate owners of entities, in order to avoid safe havens that can be misused for corruption.
The vast majority of grand corruption cases involve the use of shell companies and other opaque and complex corporate vehicles. Central registries of beneficial ownership information result in more effective and faster national and international investigations, as law enforcement officials and financial intelligence units can quickly establish who controls a legal entity. Banks and other entities that have to comply with anti-money laundering regulations can more easily and effectively establish who their customers are.
Crucially, beneficial ownership registries need to be freely accessible to the public online. This allows international law enforcement bodies to easily access the information without having to go through mutual lengthy legal assistance procedures. Public access also benefits businesses by reducing transaction and due diligence costs: Nine out of ten senior private sector executives say it is important to know the ultimate beneficial ownership of the entities with which they do business. Public access also allows the media, civil society organisations and the general public to monitor who benefits from public funds, for example through public procurement contracts or grants awarded to companies in response to the COVID-19 crisis.
Common Practical Challenges
Various practical issues can be encountered in dealing with different types of legal persons, including the nature of shares and the way that ownership and/or control is exerted on the legal person. The following is a non-exhaustive overview of some of the common practical challenges that may be encountered when trying to identify ownership and/or control of a legal person. Complex ownership and control structures. Complex legal structures can be created and exist for legitimate purposes, but the more complex they are (for example, multiple layers of ownership, spread across jurisdictions), the more difficult t is for competent authorities to identify who owns and/or controls the structure. However, even the most complex structure exists for a reason, and that reason should be understood (for example, by a bank taking on a legal person as a customer, or by a trust and company service provider [TCSP] forming the legal person). If there is no adequate explanation for the use of a complex legal structure, this could indicate that the company structure is deliberately complex to disguise the beneficial owner, or it may have been created to facilitate or commit a crime— and the relevant authority should treat this as a red flag. Ownership thresholds. For practical purposes related to carrying out customer due diligence (CDD), countries often put thresholds in place for identifying beneficial owners regarding ownership levels (for example, 10 percent or 25 per cent shareholdings).
Share ownership above these thresholds can sometimes indicate beneficial ownership but is not necessarily the only determining factor in ascertaining the beneficial owner. Legal persons can be vastly different from one another, and applying one threshold does not adequately capture the different ownership structures of these different legal entities. If thresholds are imposed, they should be set proportionate to the risk posed by the type of legal person. For example, a legal person that presents no particular risk factors might justify a maximum of 25 percent ©International Monetary Fund. Not for Redistribution Chapter 3 Practical Implementation of Beneficial Ownership Requirements 33 threshold (the FATF standards’ suggested maximum threshold), whereas higher risk situations might warrant a lower threshold or even no threshold (FATF 2012).1 Lower thresholds mean that more potential beneficial owners will be found. Lower thresholds are particularly relevant in relation to fit and proper requirements for ownership of financial institutions. Furthermore, any threshold— regardless of how low it has been set— can be circumvented through exercising control of the legal person.
Countries should clarify this in the legal framework and issue appropriate guidance to ensure that countries adopt a comprehensive definition of beneficial ownership that includes both concepts of ownership and control. At some point, the number of shareholders might also dilute ownership enough that identifying each separate beneficial owner would not be possible and would create too heavy an administrative burden. The standards recognize that if ownership is so diversified that there are no natural persons (whether acting alone or together) exercising control of the legal person through ownership, then control through “other means” should be examined. Other means might include holding a significant influence function or being closely related to a shareholder and/or being able to exert influence on them. This may be the case for certain publicly traded companies. Voting rights. Shareholder voting rights might be an indication of beneficial ownership because in theory, the power to direct the affairs of the legal person should lie ultimately in the hands of the voting shareholders. However, not all legal persons issue shares with voting rights or with equal voting rights.
For example, a company might allow shareholders one vote per share, thus giving those with higher equity in the company more votes. Other companies might allocate one vote per shareholder, thus giving minority shareholders or groups of minority shareholders a bigger say in the company’s affairs than their equity stake would otherwise suggest. Golden shares. Golden shares traditionally give the holder a majority of the voting rights, which means that the holder can outvote all other shareholders, and this often results in giving their holders effective control over the company. Although many such shares were originally given to governments after privatization of state owned companies, their wider use could give a distorted view of control if the simple value of shares was viewed as the basis for ascertaining beneficial ownership information. Nominee shareholders and directors. Legal persons that allow nominees to represent shareholders and directors can be misused by those trying to hide beneficial ownership information. Some nominee arrangements are legitimate and formal in nature (for example, governed by a written contract and disclosed to the legal person), but others can involve less formal or more opaque arrangements, in which the nominee is used primarily to conceal the beneficial owner’s identity. (See this chapter’s “Nominee Shareholders and Directors” section for a broader discussion of relevant issues.)
Undisclosed agent arrangements. Those seeking beneficial ownership information should be conscious of business and other relationships that may suggest that a director or shareholder is acting as an agent for another person. For example, a person may hold shares or a directorship in a company, but also be an employee of another person or company. It may be that the director or shareholder is acting at the behest of the controller of the company in which he is employed. This could also be a type of nominee arrangement. Family members and other strawmen. The use of strawmen in such arrange ments can be particularly challenging and can be a nominee arrangement. In such cases, the ownership and formal control of a legal person will be with a person that is (closely) related to or associated with another person. The fact that the true control may be with another person may be evident by the nature of the relation ship between the legal owner and the actual beneficial owner, such as an (unequal) family relationship (for example, parentchild), an (unequal) professional relationship for example, former employee employer), or another link (for example, former colleagues).
Another clue is the fact that the legal owner seems to have had no means to acquire the legal entity or has little (professional) experience to justify owning a company. This type of relationship between the legal and beneficial owner is especially prevalent in relation to politically exposed persons (PEPs), and FATF’s guidance provides more details in this area (FATF 2013a). Publicly traded companies. The international standards acknowledge that being listed on a stock exchange already imposes sufficient transparency requirements that would enable a financial institution or designated nonfinancial business and profession (DNFBP) to accept information that is in a public register or available from the customer or from another reliable source. However, this provision’s usefulness will depend partly on the completeness and reliability of the relevant country’s company listing process, which would need to be enforced robustly. Foreign legal persons. Where foreign legal persons are part of the chain of ownership of a legal person, challenges in accessing beneficial ownership information from host countries arise if countries do not have beneficial ownership information publicly available, do not register beneficial ownership information at all, or have a track record of not sharing accurate beneficial ownership information with other countries promptly.
In addition, when relying on the information that can be accessed on a beneficial ownership register in another jurisdiction, consideration should be given to this information’s reliability (for example, whether the country has a weak regime for anti– money laundering and combating the financing of terrorism [AML/CFT]). Related to this, countries should consider additional measures where foreign legal persons have significant control/ownership of a legal person, such as requiring that beneficial ownership information of that foreign legal person be held in the country. Figure 3.1 shows how legal ownership can be widespread, but by looking far enough up the ownership chain, the real beneficial owner can be traced by apply ing two tests: ownership (in this case, using ownership thresholds of up to 25 percent) and control.
Public Authority/Body Holding Beneficial Ownership Information or an Alternative Mechanism
Regardless of who holds information or how it is held, the guiding principles should be that the information is accurate, adequate, up to date, and accessible in a timely manner. Effectiveness can be demonstrated by adherence to these key principles, regardless of the form/mechanism in which the information is held. Having a public authority or body— such as an FIU, tax authority, or other relevant competent authority— hold this information is a way to ensure that the relevant competent authorities have access to this information timely and efficiently. The way that this information is held can vary from authority/body (for example, registry format or another type of relevant database), but the key principles remain: that the information should be collected (or there should be an obligation for legal persons or gatekeepers, where applicable, to provide this information to the relevant authority upon creation and when changes occur) and that this information should be verified so that it is adequate, accurate, and up to date.
Another key consideration is that regardless of which public authority holds this information, it should be easily and rapidly accessible to other competent authorities for their use and not restricted in any way. Of these options, holding the information in a registry format (either as part of the company registry or in other existing registries or having a separate beneficial ownership registry) is the preferred option. This section focuses primarily on the considerations necessary for implementing a registry approach, noting that registries can take different shapes and forms, including to be held in the form of multiple registries or databases (for example, separate registries for provinces, districts, sectors, or specific types of legal person). If countries choose to adopt an alternative mechanism, such a mechanism should follow similar considerations, namely, to ensure efficient access to adequate, accurate, and up to date beneficial ownership information. It is not yet clear what could be an alternative mechanism under the revised FATF standards. This will be determined on a case-by-case basis according to countries’ individual circumstances and will likely include other types of formats/mechanisms not contemplated in this guide. If a country adopts an alternative mechanism, the onus will fall on the country to demonstrate to the assessors in the context of AML/CFT mutual evaluations how this mechanism meets the requirements of the standards.
Without any current examples of this, we note that the considerations set out for the registry approach (taking a broad understanding of what a registry could be) should apply to the same extent possible for an alternative mechanism. If countries choose an alternative approach, this will put an added burden on the country to demonstrate its effectiveness to assessors as part of their mutual evaluation, and other countries that may want to access information on a particular legal person or otherwise seek international cooperation from that country. They will need to demonstrate that it is just as efficient as the registry format. Examples of what might entail alternative mechanisms may be elaborated through FATF guidance and are likely to become clearer as countries are assessed against the new standards. Countries should assess what registry mechanism/form will provide competent authorities with the most efficient access to information by considering the specific country’s risk, context, and materiality. To the extent possible, countries should be able to explain why they adopted a specific mechanism/form and document this decision, also for the purpose of explaining this during their AML/CFT assessment. For example, countries with more advanced corporate structures or in which a high number of legal structures tend to be incorporated or operate should certainly con sider adopting a registry approach held either by the companies’ registry, or as a separate beneficial ownership registry
CONCLUSION
Registries holding beneficial ownership information are a good way to centralize access to beneficial ownership information and allow competent authorities to have timely and efficient access to this information. Such beneficial ownership registries can be stand alone or built upon existing databases (such as company registries that are maintained by or for an incorporating authority) and hold basic information (that is, information about legal ownership) of companies incorpo rated or licensed in the country. The international standards do not prescribe which public authority should be tasked with the registration and ensuring the accuracy of beneficial ownership information, and the appropriate solution will differ from one country to another. Examples of possible government entities that can hold such registries are company or commercial registrars, ministries of justice, FIUs, and tax authorities. Where other authorities are to hold beneficial ownership information (for example, tax authorities), countries should ensure that these authorities have a proper understanding of beneficial ownership requirements and comply with the FATF’s requirements for holding this information because they may be more familiar with how beneficial ownership information is used in the context of their own work (for example, tax authorities might be more familiar with exchange of information for tax purposes and not the FATF standards).
In addition, fiscal confidentiality rules that tax authorities may otherwise be subject to should not apply to beneficial ownership information. Alternatively, the registry could be held by a private body that a public author ity entrusts to do so, such as businesses or business associations that may already be involved in the creation of legal persons (for example, a Chamber of Commerce, notary association). The use of such private sector entities will require some form of oversight at the government level to ensure that tasks are performed effectively and in compliance with the relevant AML/CFT requirements, and clear criteria for competent authorities’ access and use of the information will need to be developed (as with government run registries).
In general, a registry should cover companies and other types of legal persons created in a country. Where a country adopts a decentralized registry approach (for example, in federal systems or between sectors), efforts should be made to ensure that all relevant legal persons are still covered, based on the risk assessment. A country may consider that certain types of legal entities do not need to provide beneficial ownership information to the register; for example, companies listed on a stock exchange may not need to register if they are already subject to stringent disclosure and transparency requirements.2 Another example is state owned enterprises that are ultimately owned by the public and managed by the state (or state functionaries) as a fiduciary in the public interest. The concept of beneficial ownership in its traditional sense in the AML/CFT frameworks does not apply to state owned enterprises.
However, transparency of ownership and control is nevertheless critical for their effective functioning and for the detection of corruption, conflict of interest, or any rent seeking behavior by their manage ment. OECD (2015) prescribes as best practice the disclosure of governance, ownership, and voting structure of the entity, and civil society groups have also called for governments to include information on the ownership structure of state owned enterprises in their beneficial ownership reporting requirements.3 In such cases, these entities can be included in the registry with a note that no bene ficial ownership information is available or applies to them and where informa tion on their ownership and/or control structures can otherwise be found. Countries should be able to provide clear reasoning based on their risk under standing if they do allow for any such related exemptions. Based on the risk assessment, countries may choose which foreign legal per sons with high money laundering or terrorist financing risks and a sufficient link to the country are required to also provide information to the registry on their beneficial owner. This can be a requirement imposed on the foreign legal person before they are permitted to operate in the country.
Reference List
- Financial Action Task Force (FATF), International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation (FATF Recommendations) https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Fatf-recommendations.html accessed 7 February 2026.
- FATF, Guidance on Transparency and Beneficial Ownership https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Guidance-beneficial-ownership.html accessed 7 February 2026.
- Organisation for Economic Co-operation and Development (OECD), Beneficial Ownership and Control https://www.oecd.org/tax/transparency/beneficial-ownership.htm accessed 7 February 2026.
About Author
Mankirat Singh Chawla is a law student at Amity Law School, pursuing a three-year LL.B. (Honours) programme and is currently in his first year. His areas of academic interest include constitutional law and environmental law, with a growing inclination towards understanding the intersection of law, governance, and sustainable development. He actively engages in legal research and writing to explore contemporary legal issues and judicial developments.