A company applies to become a client, and its form lists a single shareholder. That shareholder is another company. The registry extract matches the form, so nothing on paper is wrong.
Yet the file cannot move. The ownership trail stops at a company, and a company cannot show a passport. The holding company may belong to a trust, or to another company set up abroad.
The account cannot open until the team knows who stands behind that holding company. Each extra layer makes that harder to find out.
UBO Meaning: The Person at the End of the Ownership Chain
A registry extract shows who holds the shares on paper, not who really owns them. An ultimate beneficial owner (UBO) is a natural person who ultimately owns or controls a company. That includes whoever has the final say over it, even without shares.
Someone moving dirty money can sit several companies away from the account.
This UBO definition follows the FATF glossary. UK and current EU rules use the same words, "ultimately owns or controls".
Beneficial Owner vs Ultimate Beneficial Owner
The term defined in US, EU and UK rules is beneficial owner, without the word ultimate. The extra word means following the chain past every holding company to a person. In KYB, both terms usually mean the same people.
Investing gives the term a second meaning. There, a beneficial owner holds stocks through a bank or broker-dealer. This is sometimes called holding shares in "street name".
A registered owner, by contrast, holds them directly with the company (SEC, Investor.gov).
A UBO Is Always a Person, Not a Company
One business client can have several UBOs, and none of them can be a company (FATF glossary). A nominee or trustee may also hold shares for someone else.
US banks may need to name up to four owners at 25 percent or more, plus one person in control. The controller can also be an owner (31 CFR 1010.230). Each person named then goes through an ID check, much like an individual client in the KYC process.
Who Counts as a Beneficial Owner in the US, EU and UK
All three check two things: who owns enough of the company, and who controls it.
|
Test |
United States |
European Union |
United Kingdom |
|---|---|---|---|
|
Ownership |
25 percent or more of the equity |
Now, over 25 percent signals ownership, and countries may go lower. From 10 July 2027, 25 percent or more |
More than 25 percent of the shares or voting rights |
|
Control |
One person in control, such as a CEO or managing member |
Most of the votes or the right to appoint or remove most of the board. From 10 July 2027, also veto rights or decisions on profits |
Ultimate control over management, or the tests for a person with significant control |
Sources: 31 CFR 1010.230, Directive (EU) 2015/849, UK Money Laundering Regulations 2017, and Regulation (EU) 2024/1624, the new EU AML Regulation, which applies from 10 July 2027.
By 10 July 2029, the European Commission must assess higher-risk types of company reported by member states. A lower line for them would be 15 percent at most, unless a higher one is more proportionate. It must stay under 25 percent (EU AML Regulation, Article 52).
A Beneficial Owner Example, Traced Step by Step
This structure is made up. Stakes are shown only against the 25 and 50 percent lines, which decide who counts.
Company A's shareholder list shows:
- Holding B, with more than 25 percent but less than half
- Holding E, with a block under 25 percent
- Person D, with a direct stake under 25 percent that, added to E's block, comes to more than 25 percent
- Small investors, none near 25 percent
Person C holds more than half of the shares and votes in Holding B. Person F holds the rest. Person D owns all of Holding E.
Count Indirect Ownership Chain by Chain
Person D is easy to leave off the list. The direct stake looks too small, and Holding E looks like a separate shareholder.
The 2027 EU rules give the method. Multiply the stakes along each chain, then add the chains together, counting every level (EU AML Regulation, Article 52). D owns all of E, so E's whole block counts toward D, on top of the direct stake.
Added up, D's total passes 25 percent, so D is a beneficial owner. F's minority share of B, times B's share of A, stays under 25 percent. US rules count stakes held "directly or indirectly" but set no formula for chains.
Control of a Holding Company Can Change the Answer
In this example, C's share through B falls below 25 percent. On the math alone, C drops off the list.
C still counts, because C controls B through a majority stake. UK company law treats C as indirectly holding all of B's shares in A (Companies Act 2006, Schedule 1A, paragraph 18). That makes C a person with significant control, and so a beneficial owner (UK Money Laundering Regulations, regulation 5).
Today's EU directive agrees, treating B's stake as a sign that C, who controls B, owns A indirectly. From 2027, whoever controls a company holding 25 percent or more directly is a beneficial owner (EU AML Regulation, Articles 53 and 54).
Under UK and 2027 EU rules, Company A's UBOs are C and D. A US bank would also name one control person.
Run the math, then check who controls each company holding 25 percent or more.
When Nobody Reaches the Threshold
What if nobody reached the line in Company A? Control still counts. The 2027 EU rules weigh it alongside ownership, from owner agreements to family ties (EU AML Regulation, Articles 51 and 53).
If that fails, or leaves doubt, UK rules and today's EU directive turn to the senior manager. After exhausting all possible means, a UK firm may treat that person as the beneficial owner. It must take reasonable measures to verify them and keep written records (UK Money Laundering Regulations, regulation 28).
In Clustdoc, the audit trail logs and dates each of those steps, which gives you that written record.
From 2027, EU firms will record that no owner was found, then verify every senior managing official (EU AML Regulation, Article 22). Those officials are not treated as beneficial owners.
The US rule needs no fallback, since it always names one control person.
When a Trust or Nominee Holds the Shares
Two structures put a third party between the shares and the person behind them.
The Beneficial Owner of a Trust
A trust can hold shares, but nobody owns a trust the way they own a company. So the rules name roles instead of stakes.
UK rules name the settlor, the trustees, the beneficiaries and anyone controlling the trust (UK Money Laundering Regulations, regulation 6). The settlor is the person who set up the trust. If the beneficiaries are not decided yet, the group the trust is set up for counts instead.
EU rules also list any protector, both now and under the 2027 regulation. If a company holds one of these roles, its own beneficial owners count too (Article 58).
In the US, when a trust owns 25 percent or more, the ownership test names the trustee (31 CFR 1010.230). Ask for the trust deed, which usually names the settlor, trustees and beneficiaries.
Nominee Shareholders and Directors
The name on the shareholder list may belong to someone acting on another person's instructions. That is a nominee, and the person giving the instructions is the one to identify.
The new EU regulation counts formal and informal nominee arrangements as ways to control a company. A formal one is a contract under which a nominator instructs a nominee to act for them (Article 53). Your records on the company must also name any nominee shareholder or director (Article 22).
Ask for the nominee agreement and the nominator's name. If the client refuses, the ownership check cannot be completed. UK and EU rules then bar the firm from opening the relationship.
A refusal is also a reason to check if the company is legit, from its registration to its real operations.
Beneficial Ownership Verification in Onboarding
Finding the UBOs is half the job, and checking them is the other half. Both are part of KYB verification, along with checks on the company itself.
For each person you name, keep on file:
- An ownership chart showing every layer down to that person
- How they qualify: ownership, control, or senior managing official
- The ID check result, document type and expiry date
- The registry extract you compared the chain with
- The date of the check and who approved it
Our identity verification checks each owner's government-issued ID and selfie alongside the company's registration documents.
UK firms must collect the registry extract before onboarding a UK company. Any material mismatch goes to Companies House (UK Money Laundering Regulations, regulation 30A).
Ownership can change after onboarding. Under the 2027 EU regulation, firms report a mismatch to the central registry within 14 calendar days (Article 24). Companies must report each change in their beneficial owners without undue delay, within 28 calendar days at the latest (Article 63).
We are happy to look at your hardest ownership structure on a demo call. We will show you how Clustdoc collects the ownership chart and each owner's ID check.
Frequently Asked Questions
What does UBO stand for?
UBO stands for ultimate beneficial owner. It is a natural person who ultimately owns or controls a company, however many companies, trusts or nominees sit in between. Banks and other regulated firms identify UBOs when checking business clients.
Can a company be an ultimate beneficial owner?
No. A company can be a shareholder or legal owner, but the FATF glossary says a UBO is always a natural person. Keep tracing until you reach people, and expect to find more than one.
What is a beneficial owner?
In anti-money laundering rules, a beneficial owner is a person who owns or controls a company, directly or through other entities. US, EU and UK rules mostly use it for the same person as a UBO. In investing, it means someone holding shares through a bank or broker.
Who is considered a UBO?
Anyone who owns or controls enough of a company, through shares, votes or other means. US banks look for 25 percent or more of the equity, plus one control person. The UK uses more than 25 percent, and the EU moves to 25 percent or more on 10 July 2027.
What is beneficial ownership in an LLC?
For a US bank, an LLC's beneficial owners are each person owning 25 percent or more of its equity, directly or indirectly. One person who controls it, such as a managing member, is added. Up to four owners may need naming, and the controller can be one of them (31 CFR 1010.230).
