Beneficial Ownership
The natural persons who ultimately own or control a legal-entity customer, which institutions must identify under the CDD Rule.
Beneficial owners are the real human beings who own or control a legal entity. Under FinCEN’s CDD Rule, financial institutions must identify and verify the beneficial owners of legal-entity customers — generally any individual owning 25% or more of the entity, plus one individual with significant managerial control.
Identifying beneficial ownership prevents bad actors from hiding behind shell companies. Separately, the Corporate Transparency Act created a federal beneficial ownership reporting regime in which many companies report their owners directly to FinCEN.
This glossary entry is educational and does not constitute legal advice. Always consult qualified legal counsel for jurisdiction-specific guidance.