Beneficial ownership:::( Most important knowledge point view)
When a bank/FI identifies a customer for opening an account, it should identify the beneficial owner(s)
and take all reasonable steps in terms of Rule 9(3) of the PML Rules to verify his identity, as per
guidelines provided below:
(a) Where the client is a company, the beneficial owner is the natural person(s), who, whether
acting alone or together, or through one or more juridical person, has/have a controllingownership interest or who exercises control through other means.
Explanation- For the purpose of this sub-clause-
1. “Controlling ownership interest” means ownership of/entitlement to more than 25 per cent of
the shares or capital or profits of the company.
2. “Control” shall include the right to appoint majority of the directors or to control the
management or policy decisions including by virtue of their shareholding or management
rights or shareholders agreements or voting agreements.
(b) Where the client is a partnership firm, the beneficial owner is the natural person(s), who,
whether acting alone or together, or through one or more juridical person, has/have ownership
of/entitlement to more than 15 per cent of capital or profits of the partnership.
(c) Where the client is an unincorporated association or body of individuals, the beneficial
owner is the natural person(s), who, whether acting alone or together, or through one or more
juridical person, has/have ownership of/entitlement to more than 15 per cent of the property or
capital or profits of the unincorporated association or body of individuals.
(d) Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the
relevant natural person who holds the position of senior managing official.
(e) Where the client is a trust, the identification of beneficial owner(s) shall include identification of
the author of the trust, the trustee, the beneficiaries with 15% or more interest in the trust and
any other natural person
exercising ultimate effective control over the trust through a chain of control or ownership.
(f) Where the client or the owner of the controlling interest is a company listed on a stock
exchange, or is a subsidiary of such a company, it is not necessary to identify and verify the
identity of any shareholder or beneficial owner of such companies.
There exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the
customer identification procedures. In such cases, banks/FIs should determine whether the
customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so,
banks/FIs should insist on satisfactory evidence of the identity of the intermediaries and of the
persons on whose behalf they are acting, as also obtain details of the nature of the trust or other
arrangements in place. The different categories of beneficiaries should be identified as defined
above. In the case of a 'foundation', steps should be taken to verify the founder managers/ directors
and the beneficiaries, if defined.
When a bank/FI identifies a customer for opening an account, it should identify the beneficial owner(s)
and take all reasonable steps in terms of Rule 9(3) of the PML Rules to verify his identity, as per
guidelines provided below:
(a) Where the client is a company, the beneficial owner is the natural person(s), who, whether
acting alone or together, or through one or more juridical person, has/have a controllingownership interest or who exercises control through other means.
Explanation- For the purpose of this sub-clause-
1. “Controlling ownership interest” means ownership of/entitlement to more than 25 per cent of
the shares or capital or profits of the company.
2. “Control” shall include the right to appoint majority of the directors or to control the
management or policy decisions including by virtue of their shareholding or management
rights or shareholders agreements or voting agreements.
(b) Where the client is a partnership firm, the beneficial owner is the natural person(s), who,
whether acting alone or together, or through one or more juridical person, has/have ownership
of/entitlement to more than 15 per cent of capital or profits of the partnership.
(c) Where the client is an unincorporated association or body of individuals, the beneficial
owner is the natural person(s), who, whether acting alone or together, or through one or more
juridical person, has/have ownership of/entitlement to more than 15 per cent of the property or
capital or profits of the unincorporated association or body of individuals.
(d) Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the
relevant natural person who holds the position of senior managing official.
(e) Where the client is a trust, the identification of beneficial owner(s) shall include identification of
the author of the trust, the trustee, the beneficiaries with 15% or more interest in the trust and
any other natural person
exercising ultimate effective control over the trust through a chain of control or ownership.
(f) Where the client or the owner of the controlling interest is a company listed on a stock
exchange, or is a subsidiary of such a company, it is not necessary to identify and verify the
identity of any shareholder or beneficial owner of such companies.
There exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the
customer identification procedures. In such cases, banks/FIs should determine whether the
customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so,
banks/FIs should insist on satisfactory evidence of the identity of the intermediaries and of the
persons on whose behalf they are acting, as also obtain details of the nature of the trust or other
arrangements in place. The different categories of beneficiaries should be identified as defined
above. In the case of a 'foundation', steps should be taken to verify the founder managers/ directors
and the beneficiaries, if defined.
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