Controlling Person (CP)
In the context of KYC/KYB, a controlling person is an individual who exercises significant control or influence over a legal entity, trust or foundation. Significant control can in this context refer to having significant ownership stakes, possessing major voting rights, the power to veto a decision, sign on behalf of the business or being authorized to make critical decisions.
Identifying the controlling person of a legal entity is essential for staying compliant with AML/CFT regulations as they can qualify as a beneficial owner and thus must be screened in accordance with the financial institution’s KYC policy.
Ultimate controller, significant controller
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CP
Examples
A financial institution onboarding a corporate client is required to identify the beneficial owners of the business. They first identify individuals with ownership of 25% or more of the company. They then look for the controlling persons. The highest managing director is identified as a controlling person due to their position. Two additional persons from the C-suit are also determined to have significant sway within the company and are thus categorized as controlling persons and beneficial owners.
FAQ
Who qualifies as a controlling person?
Individuals with significant ownership, voting rights, or influence over a legal entity’s decision making all qualify as controlling persons. Controlling persons can also have indirect control. For example, the ultimate beneficial owner of a legal entity that owns more than 40% of a different legal entity qualifies as a controlling person for both businesses.
How is a controlling person identified?
Financial institutions identify the controlling persons by analysing governance documents, shareholder registers and contractual agreements.
Why is identifying a controlling person important?
Identifying the beneficial owners of a legal entity is essential for staying compliant with AML/CFT regulations, improving transparency and mitigating the risk of financial crimes. To do so, identifying the controlling persons and major shareholders is necessary.
