Glossary term
Beneficial Owner (UBO)
Subject: Financial Crime, Customer Due Diligence and Correspondent Banking
Also known as: Ultimate Beneficial Owner, UBO, Look-through owner, Beneficial Ownership
A beneficial owner is the individual who ultimately benefits from, or has the final say over, a customer, however many companies, trusts or nominees sit in between. No register need carry their name.
Explanation
Legal ownership and real ownership often differ. A company can be held by another company, a trust or a nominee, and the person at the end of that chain is the beneficial owner. Control does not need a shareholding: the right to appoint directors, a voting agreement or influence over a trustee can be enough. Beneficial ownership is the state of owning or controlling in this way; the beneficial owner is the individual who does. Criminals and tax evaders use layered structures to hide this person, so banks and other regulated firms must look through each layer, identify the individual and verify who they are. Many jurisdictions set an ownership threshold for this check, often 25% or lower, and require a senior manager to be recorded when no one meets it. Skip the look-through and a bank can serve a front company for years without knowing who is behind it.
Example
XYZ Pvt Ltd wants to open an account, and its register shows one 70% shareholder, a holding company abroad. That company is owned by a trust set up by an individual who also appoints its directors. The bank cannot stop at the holding company. It identifies the individual as the beneficial owner, verifies their identity and records how they exercise control.
Not to be confused with
- Legal owner
- The legal owner is the name on the register, who may be only a nominee. The beneficial owner is the person who really benefits or controls.