A legal definition of BO and its associated thresholds form the foundation on which a disclosure regime is built.
Although not many legal definitions currently in operation have been tried and tested in court, early evidence shows that good definitions have a number of characteristics. A BO definition should set itself clearly apart from legal ownership by clearly stating that a BO is a natural person, including both ownership and control, and specifying that this can be exercised both directly and indirectly. There should be a single, harmonised definition in a jurisdiction, contained in primary legislation. The definition should include a broad, catch-all description of BO, complemented by a non-exhaustive list of examples, tailored to local contexts.
Thresholds are an important feature of determining when and what types of disclosures are required. However, they only relate to a limited number of types of ownership and control, albeit very common ones. When deciding the appropriate threshold levels for a BO regime, discussions should be framed around the policy goals a government wants to achieve with BOT, and what thresholds are most likely to yield data that assists in meeting these goals. A risk-based approach, especially when it comes to corruption and anti-money laundering, is likely to be the best way to effectively deploy limited government resources to do this.
It may be challenging to determine appropriate threshold levels to meet policy goals in advance, and whilst lessons can be drawn from other countries, the appropriate thresholds will be specific to local contexts. Governments should seek to make thresholds as low as possible using the RBA, whilst also balancing the potential costs and policy benefits involved with setting thresholds at different levels. Setting concrete plans at the outset of the implementation process for periodic review of threshold levels to assess their continued appropriateness is also good practice. It is also important that they provide the right guidance to companies to disclose the correct data, and that the clarity and granularity of this data is published. In order to support investigations, implementers should consider including reporting requirements in the case no natural person meets their legal definition of a beneficial owner.
As additional countries adopt legal definitions of BO, and these are tested in court, OO will continue to collect emerging evidence on best practice.