Company clients and AML: who do you need to check?

1. Beneficial owners: look through every layer

Under regulation 5 of the MLRs, that stake can be held directly or indirectly, and anyone who otherwise exercises control over the company is a beneficial owner too. The word “indirectly” is where most of the work sits. When another company sits between your client and its owners, you need to understand that company’s ownership too, and keep going until you reach the individuals at the top.

Control matters as much as the percentage. Someone with a 20% stake who can appoint the board, or who can block key decisions under a shareholders’ agreement, may well be a beneficial owner. It’s worth asking to see that agreement whenever the shareholdings look evenly spread or suspiciously neat.

2. Watch for nominees and trusts in the chain

The name on the share register isn’t always the person who benefits. Shares can be held by a nominee or by a trustee, and the register won’t always tell you that. Where a trust sits in the structure, your due diligence needs to extend to the people behind it, not just the trustee named on the register.

3. Why the PSC register is a starting point, not the answer

Regulation 28(9) of the MLRs says you can’t meet your beneficial owner requirements by relying solely on Companies House. That still applies now that Companies House verifies the identity of directors and people with significant control (PSCs). Their checks confirm who someone is, but not whether the register shows the full picture of who owns and controls the company.

If what you find doesn’t match the register, that’s useful information. Regulated firms are also required to report material discrepancies in the PSC register to Companies House, which is easy to overlook when the matter is moving quickly.

4. Screening or a full ID check?

Screening tells you whether someone appears on a sanctions, politically exposed persons (PEP) or adverse media list. It doesn’t confirm they are who they say they are, which is what the MLRs ask for with beneficial owners. For directors who aren’t beneficial owners, screening is often a proportionate starting point, with more for higher-risk matters in line with your firm-wide risk assessment.

The person instructing you needs attention too. If they’re acting on the company’s behalf, you need to check they’re authorised to do so and verify who they are, even if they aren’t an owner or a director.

5. The senior managing official is a last resort

If you’ve exhausted every way of identifying a beneficial owner, you can treat the senior person managing the company as its beneficial owner. It’s not a shortcut, and supervisors will expect to see why it was needed. You’ll need to verify that person and keep a written record of every step you took and the difficulties you came across.

6. Red flags hiding in the ownership chart

Some of the clearest warning signs sit in the structure rather than on any one person. Gaps in the chain are one of the most telling.

Others include layers registered in high-risk jurisdictions, state ownership or a PEP with a controlling stake, and an ownership structure that seems more complicated than the business needs.