Beneficial Ownership

Under 31 CFR §1010.230, financial institutions must identify and verify each beneficial owner of a legal entity customer, meaning natural persons who own 25% or more equity or exercise control over the entity, ensuring visibility into ultimate ownership rather than relying on corporate structures to obscure beneficial owners.

Covered institutions must maintain written Customer Due Diligence procedures ensuring identification at account opening, ongoing monitoring and renewal of ownership information, and verification of beneficial owner identities using documentation similar to individual customer identification requirements. The CDD Rule requires collection of beneficial owner names, dates of birth, addresses, and identification numbers.

This rule forms part of FinCEN's Customer Due Diligence Rule, a key crypto AML obligation ensuring visibility into entity-controlled wallets and accounts. Crypto exchanges must conduct beneficial ownership due diligence on corporate customers, identifying both equity owners meeting the 25% threshold and individuals exercising control through other means including voting rights, board positions, or management authority. Enhanced due diligence applies when beneficial owners are Politically Exposed Persons, residents of high-risk jurisdictions, or associated with suspicious activity. Beneficial ownership requirements address money laundering typology where criminals use shell companies, trusts, and complex ownership structures to conceal control over crypto holdings and transaction activity.