Jordanian Company’s Ownership Structure Under Scrutiny: Waqf (Endowment) and Beneficial Ownership

A Complex Legal Arrangement in Islamic Law

A recent review of a Jordanian company’s ownership structure has shed light on the complexities surrounding Waqf (Endowment), a common legal arrangement in Islamic law. The review highlights the importance of identifying beneficial ownership, particularly for foreign companies or individuals with stakes in local businesses.

What is Waqf?

Waqf, which can be public or private, is a trust-like arrangement that allows donors to allocate assets for charitable purposes. Private Waqfs can take various forms, including offspring endowments and trusts, while joint Waqfs combine elements of both. The Ministry of Awqaf (Endowment) and Islamic Affairs supervises all Waqfs, which must be registered with the ministry through an endowment deed.

Beneficial Ownership: A Crucial Concept

The beneficial ownership concept is crucial in understanding the true ownership structure of a company. According to the AML/CTF law, beneficial ownership refers to the natural person who ultimately owns or controls a customer directly or indirectly. This definition emphasizes the distinction between legal and beneficial ownership, highlighting that legal ownership may not always reflect the actual control exercised over assets.

Identifying Beneficial Ownership in Waqf

In the context of Waqf (Endowment), identifying beneficial ownership requires data tracking and evidence gathering to expose the final beneficiary who exercises effective control over the endowment’s assets. For instance, if a company is legally owned by another company, the beneficial ownership lies with the natural person or entity that owns the second company.

Compliance with AML/CTF Obligations

The review highlights the importance of compliance with AML/CTF obligations for subject entities, including financial institutions and designated non-financial businesses and professions. These entities must identify their clients, which include any natural or legal person, legal arrangement, or non-profit organization receiving services and conducting transactions with them.

Control: A Key Factor in Understanding Beneficial Ownership

The concept of control is also crucial in understanding beneficial ownership. Control refers to the direct or indirect ability to exercise an effective influence over another person’s actions and decisions. Effective control, specifically, means controlling no less than 20% of a company’s capital, unless otherwise stipulated by special legislation for certain types of legal persons.

Conclusion

In conclusion, the review underscores the significance of identifying beneficial ownership in Waqf (Endowment) arrangements, particularly for foreign companies or individuals with stakes in Jordanian businesses. Compliance with AML/CTF obligations and understanding the complex ownership structures are essential for ensuring transparency and preventing financial crimes.