Trusts and Legal Entities Partially Owned by Trusts: Identification of Ultimate Beneficial Owners

In the fight against money laundering and terrorist financing (ML/TF), Luxembourg’s financial authorities have issued guidelines on identifying ultimate beneficial owners (UBOs) in cases where a trust or legal entity is partially owned by another trust or legal entity.

Key Points

To identify UBOs, a three-fold procedure must be followed:

• Step 1: Identifying Natural Persons
  • Identify natural persons who directly or indirectly hold or control at least 25% (plus one) of shares, voting rights, or ownership in an entity.
• Step 2: Identifying Control via Other Means
  • If no natural person can be identified, identify any person who controls the legal entity via other means.
• Step 3: Identifying Senior Managing Official
  • If all possible measures have been exhausted and no UBO has been identified, identify any person holding the position of senior managing official.

Threshold Approach

The threshold approach involves identifying natural persons owning more than 25% (at least 25% plus one) of shares or voting rights in a legal person customer. However, professionals may adopt more stringent internal policies and procedures, particularly where ML/TF risks are identified to be higher.

Ownership Structure Analysis

When analyzing the ownership structure of a legal person, professionals must:

• Examine Indirect Control
  • Examine whether natural persons can be identified as UBOs, taking into account indirect control through chains of ownership.
• Repeat Process for Multiple Layers of Ownership
  • In cases involving multiple layers of ownership, repeat the process in a cascade manner until all possible UBOs have been identified.

Conclusion

The identification of ultimate beneficial owners is crucial in combating ML/TF. By following these guidelines, financial professionals can ensure compliance with regulatory requirements and help prevent illegal activities from taking place.