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DEFINITION

Director

In the context of KYB/KYC, a director is a natural person who holds a legally recognized position within a company with managing, governing and high-level decision-making responsibilities. When performing KYB, directors of a legal entity are identified as they commonly double as beneficial owners and thus must be assessed for potential risks.

Synonyms

Executive, board member

Acronyms

MD, ED, NED

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Synonyms

Executive, board member

Acronyms

MD, ED, NED

Examples

A Swiss company wants to open a corporate account. To comply with KYB regulations, the company submits a list of its directors and beneficial owners. The bank then compares this information to the Swiss registry to verify directorships and official company data. They also ask for board minutes and governance documents to establish how much control the identified directors have within the company. By doing so, the bank establishes that two of the directors qualify as beneficial owners and perform KYC checks to see whether they pose a significant risk.

FAQ

Yes. A director who owns a significant part of the company, typically 25% or more, and/or has significant control within the company, such as veto rights or the ability to sign on behalf of the company, is commonly categorized as a beneficial owner.

As directors are responsible for management and governance of a company, they present a higher risk for financial crimes such as money laundering and the financing of terrorism. By identifying directors and assessing their ownership/control of the company, financial institutions can pinpoint beneficial owners and perform Customer Due Diligence to minimize this risk.

While the two terms can overlap, they are fundamentally different. A director is a person who is legally appointed to manage the company. If they also own a significant part of the company and/or have significant control, they also qualify as a beneficial owner. However, a beneficial owner can also be a person who doesn’t have a role within the company, such as a shareholder who owns 30% of the business.

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