When the owner is another company: handling layered ownership in KYB
A corporate shareholder is never the beneficial owner; it is a branch of the ownership chain you have not finished. Screen it as an entity, multiply stakes down the chain to find effective ownership, trace the branches that can matter, and escalate the ones you cannot resolve.
Charles Archibong, Co-founder
· 5 min read
Key takeaways
- A company cannot be a beneficial owner; a corporate shareholder is an unresolved branch, not an answer.
- Effective ownership multiplies: 75% of a company that holds 60% is 45% of the customer.
- Every check can pass while the real owners stay unknown, so route unresolved chains to a person.
- Applicant-declared owners are a disclosure, not corroboration; record them as such.
When a shareholder is itself a company, do not treat it as an owner. Treat it as a branch of the ownership chain you have not finished. A company cannot be a beneficial owner; the people who own or control that company might be. So screen the corporate shareholder as an entity, work out how much of your customer each branch actually represents, trace the branches that could matter, and send the ones you cannot resolve to a person.
The risk in skipping this is concrete. Every check on the application can pass (the register matches, the directors verify, the screening is clear) while the majority owner of your customer remains unknown. The FATF's 2023 guidance names this pattern when it lists "foreign corporate shareholders, especially when part of a longer chain of opaque corporate entities" among the ownership structures that call for attention (FATF Guidance on Beneficial Ownership of Legal Persons, March 2023 (opens in a new tab), paragraph 40).
Why is a corporate shareholder never the answer?
The FATF guidance is direct: the ultimate beneficial owner "is always one or more natural persons", and "ultimately owns or controls" refers to situations where ownership or control is exercised "through a chain of ownership" (footnotes 70 and 72). A company has no face to match, no date of birth and no personal sanctions exposure in the way a person does. It can be screened as an entity, and it should be, but screening it does not tell you who benefits.
Three habits follow:
Never mark a company as a beneficial owner in your records, even when it holds 100%.
Never send a company an identity check. There is nobody to take the selfie.
Never let a corporate shareholder block or clear the decision on its own. It is a flag that more work is needed.
How your regulator expects you to treat unresolved chains differs by jurisdiction, and this article is general information, not legal advice.
How do you work out who really owns the customer?
Multiply down the chain
Ownership through a company is diluted by the company's own ownership. Multiply the percentages along the path.
Path | Calculation | Effective share of the customer |
|---|---|---|
Ada holds 75% of Parent Ltd, which holds 60% of the customer | 75% × 60% | 45% |
Bayo holds 30% of Parent Ltd | 30% × 60% | 18% |
Parent Ltd's other 25% is held by Trust Co | 25% × 60% | 15% (a further branch) |
Test the effective figure, not the raw one, against your threshold. Ada, at 45%, is a beneficial owner under any common threshold. Bayo, at 18%, is one under a 10% threshold and not under a 25% one. Trust Co is another branch.
Decide which branches can matter
Tracing every branch to its end can be expensive and slow. A branch whose whole stake in your customer is already below your threshold cannot produce anyone above it by ownership alone, because every step up the chain divides the stake further.
Be careful with that shortcut. The FATF guidance says people who exercise ultimate control "should be identified as beneficial owners, regardless of whether they own shares above any specified minimum ownership threshold" (paragraph 35). A small holding tied to board appointment rights, a veto or a shareholder agreement is a control question, not an arithmetic one. Use the arithmetic to prioritise, not to close questions about control.
Look the parent up in its own register
Where a parent company is registered somewhere you can query, look it up the same way you looked up the customer and repeat the exercise one level up. Cross-border chains are common: a Nigerian operating company owned by a Delaware holding company must be looked up in Delaware's register, not in a national US list, because some registers are split by region.
Record what the applicant tells you, for what it is
Where no register can be queried (some offshore jurisdictions do not make ownership public), ask the applicant to declare the people behind the corporate shareholder. Record those names as declared by the applicant and corroborated by nothing. A declaration is still useful: you can screen the named people and ask for supporting evidence such as a share register or a group structure chart signed by an officer.
What should you do with a chain you cannot resolve?
Decide in advance, by risk, rather than case by case.
Situation | Reasonable response |
|---|---|
Unresolved branch holds a small effective stake, no control indicators | Record it, proceed on normal review |
Unresolved branch holds a large effective stake, parent in a jurisdiction with a queryable register | Trace it before approval |
Unresolved branch holds a large stake, parent in a jurisdiction with no public register | Request a certified structure chart and declarations; senior review |
Several layers across several jurisdictions with no commercial explanation | Enhanced due diligence, and be prepared to decline |
The last row reflects the FATF's observation that structures "split across different jurisdictions" can be high risk because they "slip through the cracks" of national regulation (paragraph 40). Complexity with a clear business reason, such as a regional group structure, is different from complexity that exists to obscure.
An illustrative case
A fintech onboards a Lagos importer. The register shows two shareholders: a local director with 35% and Harbour Holdings Ltd with 65%. The applicant, when asked, declares that Harbour Holdings is owned by "our investors".
The reviewer computes the obvious: the director is a beneficial owner at 35%, and 65% of the company sits behind a corporate shareholder. Harbour Holdings is registered in a jurisdiction the fintech can query. The lookup shows one individual holding 90% of Harbour, an effective 58.5% of the importer, who was not mentioned anywhere on the application. That person is now the most important one to screen and verify, and the vague declaration is itself a reason for a closer look.
How Myaza Trust handles corporate shareholders
In Business Verification, a corporate shareholder is recognised as a company, never classified as a beneficial owner and never sent an identity check. It is screened as an entity, recorded with its registration number and surfaced as an unresolved branch. Two decision fields carry this: keyPeople.corporate counts the in-scope corporate shareholders, and keyPeople.ownershipUnresolved stays true while any of them has nobody recorded above it, so a workflow can route those applications to a person. Applicants can also declare the owners of a corporate shareholder, and those names are recorded as disclosed and uncorroborated.
Where enabled, an optional look-through setting looks a corporate shareholder up in its own register and adds the people it finds, up to three levels deep, with effective ownership multiplied down the chain and parents resolved to the right register across borders. Each step up is billed as a registry lookup, which is why it is off by default, and branches already below the threshold are not looked up. The key people documentation describes the limits.
The rule to apply
Record every corporate shareholder as a branch, not an owner.
Screen it as an entity.
Multiply stakes down the chain and test the effective figure.
Prioritise branches by effective stake, but ask the control question for every branch.
Trace what you can query; record declarations as declarations.
Route any application with a material unresolved branch to a person before approval.
Sources
Charles Archibong
Co-founder
Charles Archibong co-founded Myaza Trust. He writes about identity verification, financial technology, and the practical work of building trusted digital services.
