Beneficial Ownership

Beneficial ownership describes who really owns or controls a legal entity, as opposed to who is named on its paperwork. In US banking, the people behind a company are treated as customers in their own right, so an institution has to know who they are before it lets the company open an account.

Who counts as a beneficial owner?

Under the FinCEN customer due diligence rule at 31 CFR 1010.230, a beneficial owner is one of two kinds of person:

• Each individual who directly or indirectly owns 25 percent or more of the equity interests of a legal entity customer.
• One individual with significant responsibility to control, manage or direct the entity, such as an executive officer or senior manager.

An entity can have up to four owners under the ownership prong and always has one control person. A widely held company may have no one above 25 percent, which leaves only the control person.

How do banks collect and verify beneficial ownership?

When a legal entity customer opens an account, the institution obtains the name, date of birth, address and identification number of each beneficial owner. The customer representative supplies this on the FinCEN certification form or by another method with a certification of accuracy. The institution then verifies each person's identity using risk-based procedures that meet at least the standards of its customer identification program. Records are kept for five years.

In February 2026, FinCEN order FIN-2026-R001 gave institutions the option to stop repeating this at every new account for the same customer. They may limit it to the first account, to times when they doubt the earlier information, and to what their risk-based ongoing due diligence requires.

Is beneficial ownership the same as BOI reporting?

No. BOI reporting was a Corporate Transparency Act requirement for companies to file ownership information directly with FinCEN. As of October 2026, a final rule effective August 14, 2026 permanently exempts US companies and US persons from that filing, and only certain foreign reporting companies still file. The banking requirement is separate and still applies: financial institutions must still identify and verify the beneficial owners of their legal entity customers.

How does beneficial ownership relate to KYC, KYB and CDD?

Know your customer covers the people who open accounts, and know your business covers the entity itself. Customer due diligence is the wider process, and beneficial ownership is its core requirement for business customers. A company can pass a business check and still have an incomplete ownership file.

Frequently asked questions

What is a beneficial owner?

A beneficial owner is an individual who owns 25 percent or more of a legal entity directly or indirectly, or who has significant control over it, such as a CEO or managing member. Banks identify and verify these people when a business opens an account.

What is a UBO?

UBO stands for ultimate beneficial owner. It means the real individual at the end of an ownership chain, found by looking through holding companies and other layers. Some jurisdictions use different ownership thresholds, but the US banking rule uses 25 percent.

Why is the 25 percent threshold used?

The US customer due diligence rule sets 25 percent of equity as the ownership prong. The control prong catches people who run the entity without crossing that level, so every legal entity customer has at least one named individual.

Can an AI employee handle beneficial ownership checks?

An AI employee can collect ownership documents, build the ownership tree, compare it with registry and document records and flag gaps. People still approve the verification, the risk rating and any exception.