What are the two prongs defined as "beneficial owner" in the CDD/MDD rules?

The definition of "beneficial owner" under the Customer Due Diligence (CDD) and Minimum Due Diligence (MDD) rules specifically revolves around two key components: ownership criteria and control criteria.

Ownership criteria refer to the actual ownership stakes individuals have in the entity, such as the percentage of shares owned by individuals in a corporation. This is crucial because it helps to identify individuals who have significant equity interests in the business, thereby exposing the risks associated with that ownership.

Control criteria focus on individuals who have significant responsibilities within the entity, such as executive officers or those with the ability to make key decisions, regardless of whether they own a stake in the business. This is significant for understanding who ultimately directs the actions of the business, thereby ensuring that institutions can assess potential risks linked to those in control.

These two prongs work together to reveal the complete picture of who is behind a legal entity, enabling financial institutions to comply with regulations aimed at preventing money laundering and other financial crimes. The clarity around ownership and control is essential for risk assessment and enhanced due diligence processes.