Customer due diligence at change of ownership or succession

When a company changes owner, the information underpinning the client relationship’s risk profile changes. This means the accountancy firm must update its customer due diligence. This applies whether the transfer takes place through a family succession or an external sale to new investors. In practice, there will be one or more new beneficial owners and this must be documented and verified in line with the requirements set out in the Anti-Money Laundering Act (2017:630). The accounting firm must therefore reassess customer due diligence from the ground up, not merely refresh contact details.

When a company changes owner, the information underpinning the client relationship’s risk profile changes. This means the accountancy firm must update its customer due diligence. This applies whether the transfer takes place through a family succession or an external sale to new investors. In practice, there will be one or more new beneficial owners and this must be documented and verified in line with the requirements set out in the Anti-Money Laundering Act (2017:630). The accounting firm must therefore redo the customer due diligence, not merely refresh contact details.

For a consolidated overview of situations that require renewed customer due diligence during the lifecycle of a client relationship – including changes of ownership, changes in business activities and changes in risk profile – we refer to our review of when an accountancy firm must carry out customer due diligence.

A change of ownership can also alter the company’s risk exposure to new sectors, geographic markets or complex holding structures. If capital originates from a fund in a high-risk country, or if passive ownership layers are introduced, the firm may need to apply enhanced measures. An early dialogue with the client on the background to the ownership change helps the firm understand the commercial rationale and mitigate the risk of money laundering or terrorist financing.

Practical implications of ownership changes

A change of ownership is more than a formal transfer of shares; it can affect everything from capital flows to the company’s business direction and legal structure. New shareholders may introduce financing from other countries, establish holding companies or change the financing structure, which in itself creates new circumstances in which money laundering risks may arise. The accountancy firm must therefore analyse how the new ownership structure affects the company’s transaction patterns and the processes relevant to its accounting, rather than relying on previous risk assessments. A central element is to verify whether the company’s future strategy leads to geographic or sectoral exposure that was previously absent. By holding a structured dialogue with the client early in the process, the firm can act proactively rather than reactively.

Where acquisition financing comes from multiple sources – for example private investors, venture funds and bank loans – each source must be assessed separately. This includes where funds come from high-risk jurisdictions, family-controlled investment companies or complex trust structures where the beneficial owner is difficult to trace. A deeper review may include extracts from public registers and agreements showing who ultimately controls the financing. If the firm lacks sufficient visibility, it should apply enhanced customer due diligence until all uncertainties are resolved. This work should be documented on an ongoing basis, for example to evidence that the firm has continually updated customer due diligence while adopting a risk-based approach.

Following a succession, the new management may introduce strategic changes that affect the company’s risk profile over time, for example by expanding into new markets or digitising the revenue model. To avoid falling behind, the firm can set a timetable for ongoing follow-up of the company’s development during the first twelve months after the ownership change. In practice, this means planning structured check-ins, updating the risk classification where needed and adjusting transaction monitoring if new products or customer segments are added. In this way, customer due diligence remains aligned to the company’s actual operations and risk exposure, whilst enabling the firm to demonstrate to the County Administrative Board that risk management is dynamic and integrated with the business.

What the firm should consider when ownership structures change

• Identify the new beneficial owner: Document shareholdings, chains of control and any powers of attorney that may confer influence without formal ownership.
• Update the risk profile: Assess how factors such as a new sector, foreign owners, passive holding companies or the addition of foundations affect the client’s risk.
• Carry out fresh PEP and sanctions screening: Screen all new beneficial owners against current lists – including family members and known associates of PEPs.
• Revise the risk classification: If the risk level increases, enhanced customer due diligence measures must be documented and justified in writing under the Anti-Money Laundering Act.
• Review the engagement letter: Ensure that existing authorities to file tax returns and annual reports remain valid.

Where ownership changes occur gradually – for example in successions where shares are transferred over time – it is important that the firm’s procedures capture each step. Regular check-ins with the client reduce the risk of missing time-critical updates.

By having ready-made templates for questions on the origin of funds, documentation of customer due diligence measures taken and systematic checks of ownership layers, the firm can ensure that customer due diligence remains current. This creates transparency for both the County Administrative Board and the client, and reduces the risk that a succession or sale leads to unwelcome supervisory action or sanctions.

Ready to secure customer due diligence throughout the ownership change? Contact our AML lawyers for a complimentary review of your procedures and documentation.