Countries’ efforts to fight criminal activity— including money laundering and terrorist financing— are often obstructed because of the challenges of finding out who truly owns and controls, and benefits from, the legal entities (such as companies and other types of corporate vehicles) used in the context of these illicit activities. Most countries have systems for obtaining information on legal ownership (that is, the person or legal entity who is the legal titleholder), but the legal owner is not necessarily who ultimately owns and controls the entity. There is a need to go one step further to identify the beneficial owner (that is, the real human being who owns and controls the legal entity). Many countries have inadequate systems or no system at all for holding information on these beneficial owners.

The concept of beneficial ownership of a legal person is different from legal ownership. Legal ownership is often defined by shareholdings or membership and can include ownership by other legal persons (for example, a legal person can be a shareholder in another legal person). Beneficial ownership information relates to information about the natural person who ultimately owns or controls a legal person, including when ownership is established through a chain of ownership or by means other than direct control (for example, a natural person who can direct a legal person’s affairs and decision making but who does not necessarily own any part of the legal person). Beneficial ownership information will not always be apparent on the face of documentation maintained by or on behalf of a legal person.

Ensuring timely access to adequate, accurate, and up-to-date beneficial ownership information of legal persons is important for countries to mitigate the misuse of legal persons in criminal activities. Chapter 2 explains some of the common vulnerabilities and threats associated with the misuse of different types of legal persons.

In March 2022, the Financial Action Task Force— an intergovernmental body that sets the international standards for anti– money laundering and combating the financing of terrorism through its 40 Recommendations— adopted changes to the standards concerning requirements for collecting and holding beneficial ownership information and ensuring that relevant authorities can have timely access (FATF 2012).This guide aims to explain these requirements (focusing on how countries can achieve these objectives effectively) by considering the IMF staff’s ongoing work in this area, including in assisting countries on beneficial ownership transparency issues in the context of IMF surveillance, lending, financial sector assessments, and capacity development work.¹

Chapter 3 considers the various sources of beneficial ownership information, including their strengths and limitations, and suggests best practices to ensure that this information is adequate, accurate, and up to date. It also traces when beneficial ownership information should be collected and updated throughout the life cycle of a legal person.

Chapter 4 discusses the importance of beneficial ownership transparency for both the overall effectiveness of countries’ frameworks for anti– money laundering and combating the financing of terrorism and for efforts to fight criminal activity (such as tax evasion, corruption, and illicit financial flows) and to improve the business environment. It also discusses strengthening transparency, accountability, and governance (for example, procurement, asset disclosure and declaration frameworks, governance of natural resources) and supporting national security initiatives more generally. It makes the case for why countries should aim to put a comprehensive system in place for holding beneficial ownership information that meets the needs of all these different policy objectives and allows them to reap the benefits of beneficial ownership transparency for their broader economic growth.

Chapter 5 provides policymakers, advisors, and practitioners with guidance on essential elements that they need to consider when reviewing existing systems or deciding on establishing and implementing new systems for obtaining and holding adequate, accurate, and up-to-date information on the beneficial ownership of legal persons.

Along with the discussion, the guide proposes questions to facilitate strategic thinking of these issues among the different stakeholders. These guiding questions are a starting point to support the subsequent decision-making processes. Eventually, a country must choose to implement systems that are specific to its own circumstances. (Guiding questions are included throughout the chapters and as a stand-alone checklist in Appendix 1.)

The aim of the guide is to focus on the overarching principles required to establish an effective system, and thus it intentionally avoids including references to any specific country best practices or models that may have varying degrees of implementation and effectiveness. There is no silver bullet solution, and what works for one country might not work for another. Appendix 4 (Useful Resources) provides a list of current country references as an additional resource.

This guide builds on already existing guidance and other relevant material on beneficial ownership, including those published by the Financial Action Task Force, the World Bank, the Global Forum on Transparency and Exchange of Information for Tax Purposes, and relevant civil society organizations working in this area. The exclusive focus is on beneficial ownership issues of legal persons (companies and other types of legal entities), and it does not extend to the identification of beneficial owners of legal arrangements (for example, trusts) except for when they are part of the ownership chain of a legal person.