Complex ownership

We continue our earlier article on what beneficial owners are and how they are identified in our blog series on the EU AMLR by examining in greater depth Chapter IV on beneficial ownership transparency. Readers seeking a fuller understanding of the background to the overall structure and the key definitions relevant to beneficial ownership transparency are referred to that article. For obliged entities subject to the AMLR, compliance with the beneficial ownership requirements imposed by the Regulation is of central importance.

This part addresses Articles 53–55, which elaborate the concept of control, regulate situations in which ownership interest and control exist in parallel within complex structures, and clarify how legal arrangements are to be addressed within the ownership structure. For businesses dealing with companies that have multiple ownership layers or elements of legal arrangements, the correct application of these provisions is critical to meeting the requirements for identifying beneficial owners. Morling Consulting advises businesses on complex anti-money laundering legal matters. Through detailed analysis of ownership and control relationships, documentation requirements and risk-based assessments, we support firms in ensuring that their identification of beneficial owners is aligned with the substantive and structural requirements of the AMLR.

Article 53 – Beneficial Ownership Through Control

Article 53 develops Articles 51 and 52 by defining and structuring the concept of control and establishing beneficial ownership through control. Under Article 53(1), control over a company or other legal entity must be exercised through ownership interest or by other means. The provision therefore confirms what was established in Article 51: ownership and control are two parallel and independent bases for beneficial ownership.

Article 53(2) contains three central definitions that refine the concept of control.

First, control over the legal entity is defined as the ability directly or indirectly to exercise significant influence and to take relevant decisions within the legal entity. This definition is substantive in character. The focus is on the actual ability to influence decisions, rather than on titles or nominal status.

Secondly, indirect control over a legal entity is defined as control over intermediate legal entities in the ownership structure or in different chains of the ownership structure, where direct control is identified at each level of the structure. This means that the control analysis must be carried out step by step at every link in the ownership chain.

Thirdly, control through ownership interest in the company is defined as direct or indirect ownership of 50 per cent plus one of the shares or voting rights, or another ownership interest in the company.

Article 53(3) specifies what must, in any event, be regarded as constituting control over the legal entity by other means. Control must, under all circumstances, include the ability to exercise:

• the majority of the voting rights in the company, whether or not these are shared by persons acting in concert,
• the right to appoint or remove a majority of the members of the board, the administrative, management or supervisory body, or similar officers of the legal entity,
• relevant veto rights or decision-making rights attached to the holding in the company,
• decisions on profit distribution or decisions leading to the transfer of the assets of the legal entity.

Article 53(4) then makes clear that control may also be exercised by means other than those expressly listed in paragraph 3. Depending on the structure of the legal entity, control may also include:

• formal or informal agreements with, for example, owners or members, provisions in the articles of association, partnership agreements or syndication agreements, or equivalent agreements or instruments, which may vary depending on the voting arrangements of the legal entity concerned,
• relationships between family members,
• the use of formal or informal nominee arrangements.

A formal nominee arrangement is defined as an agreement, or similar understanding or arrangement, under which one party instructs another party to act on its behalf in a particular role, for example as a board member or shareholder. This includes structures in which a person formally appears as owner or board member but in reality acts on behalf of another.

Article 54 – Parallel Ownership Interest and Control in the Ownership Structure

Article 54 addresses situations in which ownership interest and control occur simultaneously at different levels of a multi-layered structure. The provision is intended to prevent complex ownership arrangements from creating uncertainty as to who qualifies as a beneficial owner. Where a company is owned through a multi-level structure and ownership interest and control exist in parallel in relation to different levels of the chain, beneficial owners must be identified in accordance with two alternative categories.

First, the natural persons who, directly or indirectly, through ownership interest or by other means control legal entities that hold a direct ownership interest in the company are to be regarded as beneficial owners. Secondly, the natural persons who, either individually or in the aggregate, directly or indirectly hold an ownership interest in the company that, through ownership interest or by other means, controls the company are to be regarded as beneficial owners.

Article 55 – Ownership Structures Involving Legal Arrangements or Similar Legal Entities

Article 55 governs situations in which the ownership structure consists of legal entities under Article 57 or legal arrangements, and where those entities or arrangements hold ownership interests or exercise control, directly or indirectly, through ownership or by other means. In such cases, the beneficial owners must be identified as the natural persons who in turn are the beneficial owners of the relevant legal entities or arrangements.

The provision means that the analysis must continue through the legal arrangement until a natural person is identified. For example, if a trust, foundation or similar arrangement owns a company, it is not sufficient to identify the arrangement as such. Instead, the natural persons who qualify as beneficial owners of that arrangement under the applicable rules must be identified. Article 55 therefore prevents legal arrangements from being used as endpoints in the analysis.

Why Control Analysis Matters in Effective and Legally Robust AML Compliance

Taken together, Articles 53–55 establish a more developed and substantively focused control analysis within the framework of beneficial ownership under the AMLR. The Articles clarify the distinction between ownership interest and control, regulate situations in which these arise in parallel within multi-layered structures, and ensure that legal arrangements do not constitute the endpoint of the analysis. The identification of beneficial owners must be based on a combined assessment of actual control, contractual relationships and indirect structures of influence. Articles 53–55 therefore form a central component of the EU’s ambition to prevent complex ownership structures from being used to conceal the individual who ultimately exercises influence over legal entities.

Against this background, Morling Consulting supports businesses with specialist legal advice on advanced AML matters. By combining regulatory expertise with practical experience of supervisory processes and risk assessments, we help organisations across Europe develop robust processes for identifying beneficial owners, ensure proper documentation and strengthen internal governance in line with the requirements of the AMLR. This contributes to effective, legally robust and sustainable work against money laundering and terrorist financing. Read more about our legal consultancy services here.