Behind many legal entities worldwide, there is a beneficial owner — a person who owns or controls a substantial share of a company, even if they aren’t involved in that company’s operations. Despite its prevalence, beneficial ownership stayed relatively out of the spotlight until 2022.

In September of that year, the United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a new beneficial ownership rule. By early 2024, 

 had to file beneficial ownership information. The U.K., Ireland, Australia and other countries also have equally stringent regulations regarding beneficial owners.

This article will help you understand and take steps toward complying with them by explaining:

Beneficial ownership definitions in the U.S., U.K., Ireland, Australia, United Arab Emirates (UAE) and South Africa

Regulations, standards and reporting requirements

How to file beneficial ownership information

Using technology to streamline beneficial ownership filing

A beneficial owner is an individual or entity with a management or ownership stake in a company, even if that company is legally registered to another entity. The exact definition of beneficial ownership varies slightly depending on the country. However, identifying and filing beneficial owners is essential to transparency, preventing money laundering and upholding good corporate governance.

Beneficial ownership in the U.S. refers to the true, substantive ownership of an asset or property, even if the title or legal ownership is in another name. This concept is crucial for transparency and regulatory compliance, particularly in financial and legal sectors. The beneficial owner enjoys the benefits of ownership, such as income from or control over the asset, while the nominal owner may act on behalf of the beneficial owner but does not enjoy those benefits.

To be a beneficial owner in the U.K., an entity must either hold at least 25% of shares or voting rights in a company or have significant influence over it. Beneficial owners must also file with a public register called the People with Significant Control (PSC) register.

Beneficial ownership in Ireland is similar to the U.K. but with slight differences. Ireland does not recognize influence and instead only recognizes individuals or entities that control or own, directly or indirectly, more than 25% of a company’s shares or voting rights. Companies must maintain their own internal register of beneficial owners, and then report that information to a public register.

In Australia, beneficial ownership begins when someone owns 30% or more of a company’s shares or voting rights directly or indirectly. The country also recognizes a beneficial owner as someone controlling company operations.

The UAE defines a beneficial owner as a person or entity that owns or controls at least 25% of a company or has the power to appoint or remove the company’s directors. Companies that operate in the UAE must report beneficial owners to the relevant authorities.

South Africa considers a beneficial owner anyone with a controlling interest in a company, either by holding shares, voting rights or influencing decision-making.

Beneficial ownership is a distinct and little-understood legal concept. However, many public figures are beneficial owners and can help explain how beneficial ownership plays out in various contexts.

Someone can establish a trust, which can, in turn, legally own shares in a corporation. The trust is the legal owner, but the individual is the beneficial owner because they control the trust and its assets. The individual ultimately benefits from the shares in the corporation by receiving dividends or influencing decisions.

Someone can register an offshore entity in another location, like the Cayman Islands. That entity can then own a majority stake in a company elsewhere. In this scenario, the offshore entity is the legal owner, the the person who registers the offshore entity is the beneficial owner.

This beneficial ownership structure came under particular fire in 2016 when the International Consortium of Investigative Journalists released the 

. These documents revealed hidden beneficial ownership details for thousands of offshore corporations. The papers named several public figures as beneficial owners, including British Prime Minister David Cameron.

Two individuals each hold 20% of a company’s shares. One of those individuals can allow the other to control their votes. In that case, the individual with control over both shares is a beneficial owner of 40% of the company, even though they only legally own 20%.

Mark Zuckerberg is a well-known beneficiary of a 

. While he owns less than 14% of Facebook’s stock, the dual-class share structure he enjoys gives him effective control over the company, even though other individuals collectively hold the majority of shares.

A person can be a minority shareholder in a corporation by owning a small share of its stock. However, if that person has secured special voting rights to appoint or remove executives, they are considered a beneficial owner.

Familial relationships can also influence beneficial ownership. If a person owns no shares but their spouse does, that person is considered a beneficial owner under certain frameworks because they stand to benefit from the company’s success.

Global beneficial ownership regulations, standards and reporting requirements

Beneficial ownership reporting requirements arose to promote transparency and mitigate the risk of illicit activity, such as money laundering and tax evasion. Reports like the Panama Papers only underscored the need to make it harder to conceal illegal activity behind complex ownership structures.

Though many countries have cracked down on beneficial owners, each has distinct requirements.

, part of the Anti-Money Laundering Act of 2020, aims to prevent money laundering, tax evasion and terrorism financing. Most companies formed in the U.S. must report their beneficial ownership information to FinCEN.

Companies must disclose beneficial owners’ names, birthdates, addresses and identification numbers.

 Non-compliance can result in civil and criminal penalties, including fines and jail time.

EU’s Fifth Anti-Money Laundering Directive (5AMLD): European Union

5AMLD sets out stringent requirements for beneficial ownership to enhance financial transparency. The act makes beneficial ownership information accessible to authorities and, in many cases, the general public.

Companies must report beneficial ownership information to a central register, which becomes public information.

Non-compliance can result in fines and sanctions from authorities.

European Union Corporate Sustainability Due Diligence Directive (CSDDD): European Union

The EU also tackles beneficial ownership through the lens of corporate responsibility and sustainability. Provisions in the 

 to disclose beneficial owners to promote responsible business practices throughout the supply chain.

 Companies must disclose beneficial owners as part of broader due diligence on sustainability.

EU member states must establish their own enforcement mechanisms, which can include penalties for companies that fail to disclose.

Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Standards

The Financial Action Task Force (FATF) is an international body combatting

 money laundering and terrorism financing through mandates like AML/CFT

. These include requirements around beneficial ownership transparency.

Financial institutions and specific non-financial businesses must identify and verify their clients’ beneficial owners. Countries must also maintain an accessible central register.

 Companies that fail to comply with FATF could be blacklisted or face economic sanctions.

Economic Crime (Transparency and Enforcement) Act (ECCTA): United Kingdom

 and prevent instances of economic crime, especially in the real estate sector.

Foreign entities owning property in the U.K. must register beneficial ownership details with the U.K.’s Companies House.

Companies that don’t comply may face criminal penalties like fines and imprisonment.

The process of filing beneficial ownership information varies by jurisdiction. Generally, though, companies must submit information to a central authority or registry. Here’s a step-by-step guide on how to file in key jurisdictions.

Companies in the U.S. must submit beneficial ownership information to FinCEN according to the following process:

Most small companies and LLCs must file, but certain entities like large corporations and nonprofits may have an 

Companies must then collect the names, birth dates, addresses and identification numbers of the beneficial owner(s).

 Once the reporting system is fully implemented (expected this year), companies can file an electronic report through the FinCEN Beneficial Ownership Secure System.

 FinCEN requires companies to report changes in beneficial ownership within 30 days.

, U.K. companies and foreign entities owning property and trusts must furnish Companies House with beneficial ownership information.

 Covered entities must first identify any individual or entity that owns more than 25% of shares, has voting rights or controls the company.

Entities should then gather owners’ names, birth dates, nationality, residential addresses and details of their control.

Companies can file beneficial ownership information via the Companies House website.

 U.K. companies must also file an annual confirmation statement confirming that the beneficial ownership information is current.

Australia is developing a beneficial ownership register but, in the interim, only requires companies in certain sectors to report beneficial owners.

This includes someone with 20% of the company’s shares or voting rights in sensitive sectors like mining and resources.

 Australia requires companies to submit beneficial owners’ names, addresses and the nature of their interest in the company.

Companies must submit to the relevant authority for their industry, including the Australian Securities and Investments Commission (AISC) or other sector-specific authorities.

 Australian companies must report any updates in beneficial ownership.

Companies in the UAE must file according to the country’s Ultimate Beneficial Ownership (UBO) regulations.

 Companies must identify who constitutes a beneficial owner under UAE law.

 For beneficial owners, companies must provide full name, nationality, passport details, residential address and ownership control.

 Beneficial ownership information must be submitted to the relevant authority, such as the Ministry of Economy or the respective free zone of authority, depending on jurisdiction.

Any changes in UBO information must be reported within 15 days.

Challenges of filing beneficial ownership across borders

As detailed above, different jurisdictions have different requirements for collecting and reporting beneficial ownership information. What if an entity operates in more than one jurisdiction?

While beneficial ownership regulations have improved transparency and combat financial crimes, they’ve also complicated operations for companies operating in multiple countries. The more than 

 operating across borders worldwide face myriad challenges in beneficial ownership, including:

 Building a comprehensive list of beneficial owners is more complicated than it seems. Disparate systems and departments, not to mention frequent acquisitions and restructures, create complexities in identifying entity owners and compiling the necessary information.

Ownership details can be easy to overlook, especially for companies that lack complete visibility into their structure across jurisdictions. Yet, the stakes are high; civil penalties can range from $500 per day to a maximum of $10,000 for ongoing violations.

Beneficial ownership information is highly sensitive. Though regulations require companies to share it with select officials, doing so can be risky. Personal devices and unencrypted communication can easily be exposed in a ransomware attack.

The threshold for a beneficial owner varies between jurisdictions. Someone who owns 20% of shares would be a beneficial owner in Australia but not in the UK. This complicates filing beneficial ownership because companies need different ownership datasets for the same beneficial owners depending on the country.

Differing privacy and disclosure requirements: 

Beneficial ownership is public in some companies and private in others. EU member states, for example, maintain public registers, while the CTA regulation in the U.S. restricts access to that information. Companies need to understand and navigate privacy requirements that vary widely, introducing additional risks of non-compliance.

Global entities have complex structures that include subsidiaries, trusts or offshore entities, making it difficult to identify the true beneficial owner. Untangling layered corporate structures that span different legal systems is time-consuming and increases the risk of errors or omissions.

 Companies file beneficial ownership information in different ways, from the information they must include to the authority they must register with. This can increase the time and cost of filing, which is a significant burden for smaller enterprises.

Once companies register their information, they must keep it current. Differences in timelines across countries complicate this. For example, changes for the same beneficial owner would need to be reported within 15 days in the UAE or 30 days in the U.S.

5 ways technology streamlines beneficial ownership reporting

Digital transformation is revolutionizing many company operations, including filing beneficial ownership information across borders. Digital solutions streamline processes, improve transparency and reduce the administrative burden of compliance.

Beneficial ownership: A global guide to understanding and filing

Newly elected board and council members need to absorb a great deal of information even before their first meeting. Expectations and responsibilities for their new role, what the norms are for meetings, how to have impact with new strategies and potential initiatives – these are top of mind for incoming elected or appointed officials.

They may not be expecting to learn about compliance, but this topic should head the list for onboarding and training. School districts, cities, counties and municipalities are under myriad laws, contracts and other legal mandates. Board members must thoroughly understand all legal requirements and mandates to effectively make decisions and govern their organizations.

The repercussions of noncompliance are high, including loss of funding and grants, as well as potential fines. Beyond the financial repercussions and waste of taxpayer money, noncompliance could result in losing voter and community confidence, as well as negative consequences on student and/or community populations.

Compliance training has serious implications for school boards, city councils and other elected governing bodies. Fortunately, technology can make compliance training easier and more efficient for clerks and board secretaries as well as for both newly elected and veteran board or council members.

What is the role of the board in ensuring compliance?

As the governance leaders of their council, school district or organization, board members are the ultimate authority. As such, they are responsible for the actions of their organization and its employees.

To make the stakes even higher, state and federal mandates and legal requirements are updated and change frequently, making it even more crucial that board members stay on top of the latest information and legal interpretations.

District and municipal leaders and staff play an essential a role in mitigating the risks of noncompliance by making sure that board members receive 

 on mandates and regulations. As superintendents or city managers guide trustees, they should ensure that compliance information is part of onboarding and orientation for those newly elected or appointed members.

Board members who are knowledgeable about compliance issues create stronger policies and make better decisions. Strategic planning with compliance in mind saves time and resources. Upskilling your trustees helps protects the reputation of the organization, district or council. This, in turn, increases public support.

Compliance training also helps board members, 

, feel confident about making decisions and weighing in on issues that come before them. Through training, they gain an understanding of overall governance issues, such as of ethical standards, procedural rules and the scope of their authority and responsibilities.

Expectations that all board members will receive compliance training also helps to foster a culture of ethics and accountability on the board.

If an issue does crop up, having a strong track record and culture of ongoing compliance training will demonstrate that the board and the organization have been making good faith efforts to learn about and adhere to current legal requirements and mandates.

“The conduct of government employees and elected officials is a reflection of the government body as a whole. As such, it is vital that the decisions and behaviors of government employees and elected officials result in transparency, accountability and impartiality. Not only is the letter of the law of great importance, but the appearance of ethical behavior and decision-making will make or break whether or not public trust is secured and maintained. Elected officials have a social responsibility to ensure they remain 

.” Lisa Frederick, City Clerk and Deputy City Administrator, City of Clinton, Iowa

Check your what your state school board association offers

School board members often have additional training resources available to them via their state school board association, where they can attend classes that provide them with information and tools and even certification.

For example, Missouri law requires that all school board members receive 18.5 hours of training within their first 12 months of service. 

 offers free training materials for all board members to become a certified board member, and by taking additional classes, board members can also achieve extra certifications such as "master board member".

Board management software can support compliance training

 can support compliance training, making training more efficient for the board clerk and effective for both new and veteran board members. Regulations and other information can be categorized for more effective searching.

Information can be organized in various ways so board members can understand the context of the mandates and regulations. They will also be able to see how regulations affect the different aspects of their organization, from employee compensation and benefits and financial documentation requirements to social media use and data security precautions.

Through a central platform, board members can securely access the training information they need, including documents, records, meeting minutes and legal briefs. Committees can also access documents, review and understand implications and impact of mandates and regulations on board governance and decision-making.

A tip: when storing key information add a document with review questions to help guide learning and make information easier to remember and understand.

Tips for effective compliance training for board members

Use a centralized repository or online platform for easy access to information and resources.

Emphasize the need for board members to avoid email and instead use your board management solution to access key documents, as that helps them to stay compliant and safe against cyberattacks.

Allow board members to work through and complete the training at their desired speed but request that they inform you when they have completed it.

As part of the training, demonstrate to board members how they can bookmark and annotate notes, and they can retrieve the information when they need it.

Smart naming of key documents to categorize regulations, mandates and other information will help guide searching.

Include recent internal or external audit results for board members to analyze as part of the training sessions.

Include the board’s legal counsel in appropriate training sessions, allowing for questions, whether verbal or written.

Include scenarios for board members to consider and practice on. These scenarios can include potential ethical issues that the board may confront. These scenarios will help board members see the practical implications of regulation and mandate compliance.

Diligent Community is a cloud-based software solution that is specifically designed for publicly elected boards. It is a powerful tool that can help board members be compliant, efficient and effective. Its document library can host board member training resources to help set them up for success and make the best use of the platform.

The platform provides a central location for all board documents, including easy search to find and then access key information through the document library, so there’s no need to search through many emails to find latest documents. It’s a secure environment that protects against cyberthreats, so board members can feel confident their training information and compliance documentation is secure.

Find out how Diligent Community can make your compliance training easier and more efficient. Request a 

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