Identifying Beneficial Owners is not Always Easy. Here is Why

Keeping track of who owns what in a company is not always simple, even in the modern digital age. This is especially true when it comes to beneficial ownership; knowing who benefits from a company rather than simply investing in it, and ensuring that person is not trying to evade taxes or other responsibilities. The risk of money laundering, terrorist financing, and other crimes is much higher when someone can represent themselves as another entity or a third party. This article explains why identifying beneficial owners is not always easy and what you need to do to solve this problem.

According to the International Compliance Association, finding beneficial owners is the only reliable way to prove that you are not violating international sanctions. Consequently, you do not create risks for your business.

Beneficiary disclosure is one of the crucial steps in Customer Due Diligence which is standard for progressive companies. The Financial Action Task Force on Money Laundering (FATF) issued Guidance on Transparency and Beneficial Ownership for countries and financial institutions for Customer Risk Assessment a long time ago. The EU Anti-Money Laundering Directives have made beneficial ownership a key parameter for businesses worldwide.

The beneficiaries are the crucial elements in unravelling the whole pile of connections with Russian companies. Identifying the actual beneficial owners of the sanctioned companies would allow the sanctions to work fully. It can also prevent Russian businesspeople from hiding their assets and creating risks for companies worldwide.

But find the right data could be quite tricky. Some jurisdictions do not have an Open Ownership Register; in others, data may be inaccurate.

The search for the beneficiary becomes even more complicated when the shareholders are not individuals but legal entities. It is then necessary to investigate the entire sequence of connections before identifying the person whose influence and control exceed the limits in that jurisdiction.

Beneficial ownership data can be concealed using:

• Shell companies;
• Complex ownership and management structure;
• Bearer shares;
• No restrictions on legal entities as directors;
• Formal and informal nominee shareholders and directors;
• Trusts;
• Intermediaries in incorporation.

Beneficial ownership is one of the most effective ways to combat money laundering, tax evasion, and other financial crimes. However, in many jurisdictions it is murky.

To find all this data correctly, you will probably need an intermediary tool to find data on companies and people and track assets globally. We at YC World have the most comprehensive database of legal entities, individuals, and PEPs from registries. We can trace connections between individuals and companies across the globe, not only within a specific country.