What is the "ultimate beneficial owner" and why does it matter?

The Anti-Money Laundering legislation uses the term “ultimate beneficial owner” (UBO). In determining who controls the business partner, knowing the ultimate beneficial owner can be useful.

What is the Ultimate Beneficial Owner (UBO)

An ultimate beneficial owner is any natural person who ultimately owns or controls a corporate entity or other legal entity and/or the natural person(s) on whose behalf a transaction or activity is being conducted.

As a general rule of thumb (and without prejudice to the specific circumstances of a case), the ultimate beneficial owner of a legal entity may be the natural person who:

• holds an equity interest of at least 25%; or
• wields at least 25% of the voting rights; or
• is the beneficiary of at least 25% of the equity.

Estonian approach

According to § 9 of the Estonian MLTFPA “beneficial owner” means a natural person:

• who, via ownership or other type of control, has the final dominant influence over a natural or legal person, or
• in whose interests, for the benefit of whom, or in whose name a transaction or operation is made.

Where a beneficial owner cannot be identified in the manner specified above, the beneficial owner of a company is a natural person whose direct or indirect shareholding or the total shareholding of all of the direct and indirect shareholdings in the company exceeds 25%, including shareholdings in the form of bearer shares or otherwise.

Trustee as a beneficial owner

According to the Estonian MLTFPA, if a company’s beneficial owner is a trustee, all persons specified in clauses 1–5 of § 9 subsection 6 are considered beneficial owners:

1. the settlor of the trust or the establisher of the arrangement;
2. the trustee;
3. the person ensuring and controlling the preservation of property, where such person has been appointed;
4. the beneficiary, or where the beneficiary or beneficiaries are yet to be determined, the class of persons in whose main interest such trust or arrangement has been set up or operates;
5. any other person who in any way exercises ultimate control over the property of the trust or arrangement.

Other legal rights may confer control over the EU obliged entity’s business partner on a person or entity subject to EU restrictive measures. Such rights may include the ability to appoint members of the management or supervisory board, to exert a dominant influence over legal and business decisions, or to act as a major financier.

EU obliged entities might consider referring to Article 3(6) of Directive (EU) 2015/849 (Anti-Money Laundering Directive) for further details on identifying beneficial owners of legal persons and legal arrangements.

UBO disclosure policy fundamentals

EU obliged entities must conduct comprehensive Due Diligence on all counterparties, as well as prospective counterparties, to ensure complete transparency and clarity regarding Ultimate Beneficial Owners (UBOs). EU obliged entities should strictly adhere to their UBO Disclosure Policy, which should mandate absolute clarity and verifiable information about UBOs before entering into any business transactions. Furthermore, all counterparties who are financial market participants are required to obtain a valid Legal Entity Identifier (LEI code) as a prerequisite for any business engagement. If there is any uncertainty or lack of transparency regarding UBOs or if an LEI code is not provided, EU obliged entities must not proceed with the partnership or transaction under any circumstances.

Example

Suppose the legal entity is owned by two (2) other legal entities, e.g., company A and company B, each holding 50% of the shares. Then, the EU obliged entity needs to know the ownership structure of companies A and B, and so on, until they reach the Ultimate Beneficial Owner(s), who must always be a natural person(s).

If both entities (Company A and Company B) are owned by other legal entities, the responsible person will be required to reveal their ownership structure as well.

The critical role of UBO identification

The practical necessity of due diligence is sharply illustrated by recent regulatory and public registry filings concerning PAYMASTER a.s. and Gemba Finance Ltd. While corporate names and jurisdictions may change, a thorough Ultimate Beneficial Owner (UBO) lookup allows compliance teams to see past surface-level shifts and identify continuity of risk. For instance, public records from the Latvian commercial register (Lursoft) and UK Companies House indicate that both entities have shared identical management and ownership structures under Russian national Alexander Legoshin and Latvian national Ugis Latsons. Cross-referencing these UBO insights with official legal developments reveals that a Latvian criminal investigation was initiated in 2023 regarding the alleged misappropriation of funds at PAYMASTER a.s.—an inquiry in which corporate documentation connects Alexander Legoshin to the entity under investigation. Furthermore, an independent 2024 report by Transparency International Russia explicitly linked these same individuals to international corporate networks and flagged associated operational risks.

When entities undergo liquidation or restructuring, relying solely on basic company name checks leaves blind spots; using comprehensive UBO data is the only reliable way to verify who truly controls a business partner and to ensure objective compliance with AML and sanctions frameworks.