Beneficial Ownership and Identity Verification
Who is the beneficial owner?
A beneficial owner is the natural person who ultimately owns or controls the customer - or the person on whose behalf a transaction is conducted. For companies, look through layers to the individuals who ultimately own or control. Thresholds and control tests must be applied; the key trap is stopping at a corporate shareholder and never reaching a human being.
Trusts and complex structures
For trusts, identify the settlor, trustees, beneficiaries (or class of beneficiaries), and any protector or person with effective control. For partnerships, identify the partners. Where ownership is unclear, apply a control test - who exercises effective control?
Verification methods
The Identity Verification Code of Practice describes acceptable methods: documentary verification (e.g., passport plus a second government-issued document or a bank statement), or electronic verification using reliable, independent sources. For entities, verify existence and structure via registers or independent sources, then verify the individuals behind them.
Red flags and traps
- Nominee shareholders or bearer shares masking control.
- Structures with no apparent commercial rationale.
- A customer who cannot explain who really benefits.
- Assuming a director is necessarily a beneficial owner - control, not title, is the test.
Worked example
Company A is 100% owned by Company B, which is 60% owned by Ms X and 40% by a family trust. You must identify Ms X and the trust's settlor, trustees, and beneficiaries, verifying each natural person.
Rule of thumb
Keep looking until you reach a real person with real control. If a structure prevents that, treat it as higher risk and escalate.