21-02-2025

Global UBO Thresholds and Key Regulations

Complete guide for Ultimate Beneficial Ownership thresholds in major countries

Introduction: Understanding Ultimate Beneficial Ownership (UBO)

Definition:
A UBO is the individual who ultimately owns or controls a company or entity, even if ownership is through multiple layers. Typically, this is someone holding a certain percentage of shares (e.g., 25% or more) or exerting significant influence.

Understanding Ultimate Beneficial Owners (UBOs)

Definition: A UBO is the individual who ultimately owns or controls a company or entity, even if ownership is through multiple layers. Typically, this is someone holding a certain percentage of shares (e.g., 25% or more) or exerting significant influence.

Example: Alice owns 30% of Company A, which in turn owns 100% of Company B. Despite not being a direct shareholder of Company B, Alice is the UBO of Company B due to her indirect ownership and control.

Why UBO Is Needed:

  • Ensures compliance with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) laws.
  • Promotes transparency and prevents illegal financial activities.
  • Helps financial institutions and regulators identify real owners behind corporate structures.

When UBO Information Is Required:

  • Registering or incorporating a new company.
  • Opening corporate bank accounts or engaging with financial institutions.
  • Conducting mergers, acquisitions, or significant financial transactions.

What Is the Difference Between a Shareholder, Beneficial Owner, and Ultimate Beneficial Owner?

  1. Shareholder

    • A registered owner of shares in a company.
    • Holds legal title but may not have control if shares are held through intermediaries.

  2. Beneficial Owner

    • The individual who actually benefits from a company’s assets or profits.
    • May not appear on official shareholder registers.

  3. Ultimate Beneficial Owner (UBO)

    • The natural person who ultimately owns or controls a company, even through multiple layers of ownership.
    • Often used interchangeably with “beneficial owner,” but emphasizes final, direct control and influence.

For instance, a beneficial owner might be one of several people who each own parts of a company’s shares and receive dividends. However, the ultimate beneficial owner is the person who stands at the end of that ownership chain, wielding the most significant influence or control (often by owning 25% or more). If multiple beneficial owners each hold a significant stake, they can all be considered UBOs if each meets the threshold for ultimate ownership or control.

Nominee Shareholders vs. UBOs

In some situations, an individual may hold a company’s shares without deriving any actual benefits. For instance, a nominee shareholder might appear on the register but have no right to vote, receive dividends, or enjoy other share-related benefits. Such a nominee is not considered the UBO because they lack the substantive rights typically associated with beneficial ownership.

Example:
Company X has a nominee shareholder, Alex, who holds 30% of the shares on behalf of Maria. Alex does not vote, collect dividends, or benefit from share value. Hence, Maria is the UBO, because she ultimately reaps the benefits and wields genuine control, while Alex is merely a nominee on paper.

Practical Implications

  • A UBO is someone with ultimate control over a business, typically owning at least 25% of its shares.
  • A beneficial owner is any person who owns shares and derives financial benefits from them.
  • A shareholder may be a simple record holder on official documents without necessarily having the underlying beneficial interest.

When opening a new account, financial institutions (e.g., banks) typically need to identify and verify:

  • Each individual owning 25% or more of the company’s shares.
  • At least one individual with ultimate control over the entity.

This ensures compliance with AML/KYC regulations and helps prevent financial crimes such as money laundering.

The Importance of UBO Verification

Regulatory Mandates and Consequences of Non-Disclosure: Financial institutions are required to identify and verify UBOs. Undisclosed UBOs create opportunities for money laundering.

Key Facts about UBO Legislation: UBO legislation provides clarity about business partners and reduces the risk of dealing with entities facilitating criminal activities. While a 25% ownership stake is often used as a benchmark (FATF) for identifying UBOs, the specific percentage can vary significantly depending on the jurisdiction. Key examples of country-specific thresholds and regulations are shown below.

Importance of UBO Verification for Countries: UBO verification is crucial for countries to address financial crimes effectively and comply with regulations.

Why UBO Identification is Important: Regulators are increasingly focused on combating financial crime. UBO legislation helps identify fraudulent entities using offshore accounts.

Security and AML Compliance: Accurate UBO identification enhances security against shell companies and ensures compliance with Anti-Money Laundering (AML) regulations, including the EU's 5AMLD.

5AMLD Specifics: 5AMLD introduced broader transparency by extending UBO checks to higher-ranking officials and senior managers, aiming for public access to UBO registers. However, following a 2022 ruling by the European Court of Justice, full public access to these registers has been restricted in several EU Member States. Despite this change, 5AMLD still requires that relevant authorities and individuals with a legitimate interest can obtain UBO information, and information regarding trusts must be available to competent authorities.

Who is Considered a UBO (General): A UBO is the legal owner or entity exerting ultimate control over a company.

Specific UBO Criteria: Common thresholds for UBO status include:

  • Beneficiary of at least 25% of the capital.
  • Holding a minimum of a 25% stake in the capital.
  • Possessing at least 25% voting rights.

Further Definition of UBO: A UBO is a natural person who owns or exercises control over a company, trust, or legal entity, deriving benefits from its assets and profits. They are the actual person behind a legal entity, exerting control, whether through direct or indirect means.

How to Identify and Verify UBOs

Follow these steps to accurately identify and verify Ultimate Beneficial Owners:

  1. Collect the Company’s Data
    Gather comprehensive and current information, including the firm’s registration number, name, address, official status, and the names of top management employees.

  2. Review Ownership Structure
    Analyze the individuals or entities holding a stake in the company. Identify whether ownership is direct or indirect by examining shareholders, directors, and any intermediate entities in the ownership chain.

  3. Identify the Ultimate Beneficial Owner(s)
    Detect shareholders who meet substantial ownership thresholds (e.g., 25% or more in shares or voting rights). Identify those individuals whose holdings qualify them as UBOs.

  4. Verify UBO Data
    Authenticate the provided UBO information by cross-referencing it with reliable sources such as government databases, public records, or other trustworthy sources to ensure accuracy.

  5. Conduct AML/KYC Checks
    Verify the identity of all UBOs through document verification, selfie verification, and proof of address. Additionally, cross-reference UBOs against sanctions databases, Politically Exposed Persons (PEP) lists, and perform adverse media checks to detect any red flags.

  6. Proceed with Enhanced Due Diligence (EDD)
    For high-risk individuals or complex ownership structures, conduct enhanced due diligence. This may involve comprehensive research, engaging third-party providers, or utilizing automation tools to gather in-depth UBO information.

Additional Considerations

Risks and Mitigations

What Risks Do Companies Face Regarding UBOs?

Infiltration by undisclosed UBOs can expose companies, especially those in financial services, to significant risks such as:

  • Money Laundering: Undetected UBOs with concealed identities can manipulate the company to facilitate money laundering.
  • Undetected Financial Crimes: Hidden owners may misuse digital platforms and transactions, obscuring the origins of illicit funds and complicating efforts to trace criminal activities.
  • Operational Challenges: Complex ownership structures, limited access to reliable data, and higher compliance costs can hinder effective UBO screening.
  • Legal and Reputational Damage: Failure to identify and verify UBOs not only risks regulatory non-compliance but can also result in legal consequences and serious damage to the company’s reputation.

Can RegTech Tools Help Mitigate UBO Risks?

Automated software screening and various RegTech platforms can significantly reduce UBO risks by streamlining the due diligence process. These AI-powered solutions:

  • Verify UBO Identities: Cross-reference data against regulatory databases to ensure accuracy.
  • Monitor for Suspicious Activities: Utilize advanced analytics to detect potential red flags.
  • Enhance Screening: Offer integrated capabilities such as PEP and sanctions screening, adverse media checks.

Key Countries’ UBO Thresholds and Regulations

Below are some key countries’ UBO thresholds (percentage of ownership/control) and relevant regulations or references.

1. India

2. USA

3. EU

  • Threshold: 25%
  • Regulations: 4th/5th AMLD across EU Member States
  • Reference: EU AML Directives

4. Singapore

  • Threshold: 25%
  • Regulations: ACRA’s register of registrable controllers
  • Reference: ACRA (Singapore)

5. Hong Kong

  • Threshold: 25%
  • Regulations: Companies Ordinance (Significant Controllers Register)
  • Reference: Companies Registry (HK)

6. Australia

  • Threshold: 25%
  • Regulations: AML/CTF Act 2006
  • Reference: AUSTRAC

7. UK

  • Threshold: 25%
  • Regulations: People with Significant Control (PSC) Register
  • Reference: UK Companies House

8. Netherlands

9. France

10. Germany

11. Turkey

12. Brazil

  • Threshold: 25%
  • Regulations: CNPJ registration & Brazilian AML (Coaf)
  • Reference: Coaf (Brazil)

13. Canada

14. South Africa

15. Mexico

  • Threshold: 25%
  • Regulations: AML/CFT laws under UIF (Unidad de Inteligencia Financiera)
  • Reference: UIF (Mexico)

16. Russia

17. China

18. Japan

19. South Korea

  • Threshold: 25%
  • Regulations: Financial Services Commission guidelines
  • Reference: FSC Korea

20. Saudi Arabia

21. Argentina

  • Threshold: 20% (sometimes 25% for certain entities)
  • Regulations: UIF (Unidad de Información Financiera)
  • Reference: UIF Argentina

22. Nigeria

23. Indonesia

  • Threshold: 25%
  • Regulations: Financial Services Authority (OJK)
  • Reference: OJK Indonesia

24. Peru

  • Threshold: 10% or 25% (depending on entity type)
  • Regulations: AML guidelines by SBS (Superintendencia de Banca, Seguros y AFP)
  • Reference: SBS Peru

25. Malaysia

  • Threshold: 20%
  • Regulations: Companies Commission of Malaysia (CCM)
  • Reference: SSM (Malaysia)

Rationale for the 25% Threshold

  • Risk-Based Approach Guidance on Beneficial Ownership:
    FATF suggests a risk-based approach for beneficial ownership. 25% is common, yet some countries set lower thresholds if risk is deemed higher.
  • Practical Identification
    25% typically balances meaningful oversight with feasible compliance.
  • Regulatory Consistency
    Many jurisdictions align with FATF guidance for uniform standards.

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