Ultimate beneficial ownerUBO

The real human who ultimately owns or controls a company.

A company can be owned by another company, which is owned by another, but at the end of the chain there is a person, and that person is the ultimate beneficial owner.

A natural person meeting the ownership or control threshold behind a legal entity. A natural person is a real human being, as opposed to a company, and a legal entity is an organization that the law treats as its own party.

Two tests commonly identify an ultimate beneficial owner (UBO):

• Ownership, where a person owns a share of the entity at or above a threshold, often 25 percent, though the number varies by jurisdiction.
• Control, where a person exerts significant influence, such as through voting rights, board appointments, or an executive role, even without a large ownership share.

Tracing a UBO typically works like this:

1. The institution collects the company's ownership information.
2. It follows the chain of ownership through each layer of companies.
3. It identifies the real people who meet the ownership or control tests.
4. It verifies those people's identities and screens them.

UBOs sit next to terms that are easy to mix up:

• Know your business (KYB) is the process of verifying a company, which includes identifying its UBOs.
• Enhanced due diligence (EDD) is the deeper review that complex ownership can trigger.
• Legal owner is whoever holds title on paper, which may be a company or a nominee and not the real person behind it.

For more, see What is an Ultimate Beneficial Owner, or UBO?