Last updated: July 2021
Beneficial ownership should be clearly and robustly defined in law, with sufficiently low thresholds set to ensure all relevant ownership and control interests are disclosed
- Robust and clear definitions of beneficial ownership should state that a beneficial owner should be a natural person. Definitions should cover all relevant forms of ownership and control, specifying that ownership and control can be held both directly and indirectly.
- There should be a single, unified definition in law in primary legislation, with additional secondary legislation referring to this definition.
- The definition should comprise a broad catch-all definition of what constitutes beneficial ownership, and this should be coupled with a non-exhaustive list of example ways in which beneficial ownership can be held.
- Thresholds should be set sufficiently low so that all relevant people with beneficial ownership and control interests are included in declarations. A risk based approach should be considered to set lower thresholds for particular sectors, industries, or people, depending on the policy objectives set.
- Definitions should include a clear prohibition of agents, custodians, employees, intermediaries, or nominees acting on behalf of another person qualifying as a beneficial owner.
Clearly defining beneficial ownership and ensuring it covers all relevant forms of ownership and control makes the disclosure regime less vulnerable to exploitation by those seeking to abuse the system.
Using low thresholds to determine ownership or control reduces the risk that someone with relevant ownership or control remains hidden. Whilst extremely low thresholds may become too labour or cost intensive without providing useful insight into significant ownership or control, using thresholds that are too high can create a potential loophole that can be exploited. A risk based approach can help determine appropriate thresholds that balance these factors, bearing in mind the country’s policy aims. Lower thresholds may be warranted for high-risk sectors, industries, and people. Where possible, definitions should be harmonised regionally and internationally, or similar minimum standards should be adopted.