A beneficial owner is the natural person who ultimately owns or controls a company, legal entity or account, even if that ownership or control is exercised indirectly through layers of corporate structures, trusts or nominee arrangements. In other words, the beneficial owner is the individual who benefits from or has effective control over the entity’s assets, profits or decision-making, regardless of whose name the entity or account is legally registered under.

In the context of Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance, identifying the beneficial owner is critical for understanding the true individuals behind a business or financial relationship. This helps uncover potential financial crime risks, such as money laundering, tax evasion, corruption or sanctions evasion that can be hidden behind complex or opaque ownership structures.

Regulations in most jurisdictions require financial institutions and regulated entities to collect and verify beneficial ownership information during the customer due diligence (CDD) process, particularly for companies and legal entities. A commonly used threshold is identifying individuals who own or control 25% or more of a company, though some jurisdictions may apply stricter criteria.

Accurately identifying and monitoring beneficial owners helps institutions meet regulatory requirements, assess risk more effectively and prevent illicit actors from misusing the financial system for unlawful gain.