Understanding Beneficial Ownership

What is a Beneficial Ownership?

Beneficial ownership refers to the individuals who ultimately own or control a company or asset. Knowing the beneficial ownership of a company or asset is critical for businesses and financial institutions to identify and mitigate potential risks such as money laundering, fraud, and terrorism financing. However, in some cases, it's not enough to only identify the beneficial owner of a primary entity. In such cases, we are required to collect beneficial ownership information for secondary or parent entities.

This article aims to explain the importance of collecting beneficial ownership information for secondary or parent entities per FinCEN guidance https://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdfhttps://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf

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Why do we collect beneficial ownership information for secondary or parent entities?

In many cases, companies or assets are owned by another company or asset, known as the parent entity. Collecting beneficial ownership information for the parent entity is crucial as it helps Payrix to have a comprehensive understanding of the ownership structure and control of the primary entity. This information helps to identify the individuals who ultimately control and influence the primary entity, including potential sources of funding, business operations, and decision-making processes.

Furthermore, collecting beneficial ownership information for secondary or parent entities is essential in situations where the primary entity is owned or controlled by multiple layers of companies or assets. In such cases, knowing the beneficial ownership of each layer helps Payrix to identify potential risks associated with complex ownership structures, including money laundering, tax evasion, and other financial crimes.

Collecting beneficial ownership information for secondary or parent entities is also essential for compliance with legal and regulatory requirements. Many countries have introduced laws and regulations that require businesses and financial institutions to identify the beneficial ownership of companies or assets. Failure to comply with these requirements can result in severe financial and reputational damage, including fines, sanctions, and legal action.

In conclusion, collecting beneficial ownership information for secondary or parent entities is critical for Payrix to mitigate potential risks associated with complex ownership structures, comply with legal and regulatory requirements, and maintain a comprehensive understanding of the ownership structure and control of primary entities. By collecting and verifying beneficial ownership information, Payrix can ensure that they are not facilitating financial crimes and are complying with legal and regulatory requirements.