What are beneficial owners?
When it comes to buying and selling property, the professionals involved, i.e. Estate Agents, Mortgage Brokers and Conveyancers, have a professional responsibility to make sure the property changing hands is not being used for money laundering.
A big part of doing that is understanding who is or will be the owner of a property and when companies are involved, who the ‘beneficial owners’ are.
What does beneficial owner mean?
When we talk about a ‘beneficial owner’, we’re talking about the person who actually owns or has control over a company or property. It’s about who benefits from owning it, whether they own it directly or through a bit of a roundabout way. This term pops up a lot in legal situations, especially in the fight against money laundering.
Financial institutions have to make sure they know who the beneficial owner is, to help stop financial crimes like laundering and funding for the wrong reasons.
Beneficial ownership versus legal ownership
Beneficial ownership of a property is when an individual or organisation has the right to use and occupy the property but they don’t actually own the legal title. Legal ownership, on the other hand, is when an individual or organisation has the right to use, occupy and sell the property.
The beneficial owners of a property, as well as the legal owners, will be identified as part of the conveyancing process.
Due diligence is carried out by both conveyancers and estate agents on their clients to ensure that they’re not knowingly involved in money laundering or other criminal activities. This includes verifying the identity of all beneficial owners involved in the a property transaction.
How to identify the beneficial owner of a property
Sometimes, this is as simple as reviewing the title register of a property and identifying the named owners, but it can become a little more complex when companies and trusts are involved.
If the property is owned by a company, the company name will be listed in the title, and to find out who owns it, you’re able to check Companies House. The Register lists the directors of the company, as well as any shareholders with more than 25% ownership in the company.
There’s also a Register of Overseas Entities (ROE), which includes information on overseas companies and trusts that own or have an interest in UK property. This register is available to the public, but it can be difficult to find out who the beneficial owner is, as the information is not always up to date.
If identifying the beneficial owner of a property isn’t possible, the transaction is likely to be at a higher risk of money laundering. In these situations, you need to carry out enhanced due diligence on those involved in the transaction and in really complex cases, you may decide to refuse to deal with it.
Why identifying beneficial owners is important
Identifying the beneficial owners isn’t just a box-ticking exercise; it’s crucial for meeting anti-money laundering requirements. Identifying them before a sale or purchase helps to prevent illegal activity, meets AML rules, and protects both parties from falling into fraud traps.
Beneficial owners can be hidden behind layers of legal entities, making them tricky to spot. But understanding who you’re really dealing with is part of your essential checks. This might mean getting to grips with the structure of a company or trust before doing business with them.
Beneficial owners & Kotini
Estate Agents using Kotini to onboard their sellers and buyers have it easy when it comes to understanding the beneficial ownership of a property. Kotini does most of the investigation for you, quizzing your sellers on the ownership of the property and when a company or trust is involved, gathering details on and identifying everyone who has a controlling share.
All that’s left for agents using Kotini to do is review the information gathered, make sure there are no gaps and that they’re comfortable with who they’re dealing with.
