PrimeGlobal News

During the early years of my career as a tax advisor, I have seen ‘travellers of the world’; I have listed, on paper, several countries (counted more than thirty, but I am sure that I am missing some), mainly exotic islands - but also European and Western countries, whose jurisdiction allowed individuals to hide their identity behind screens of different types: groups of companies, trusts, fiduciaries, nominees and intermediaries of all types.

The need for greater transparency regarding corporate ownership structures emerged progressively during the late twentieth century, particularly with the expansion of international financial markets and the widespread use of complex ownership arrangements (I call them ‘shields’).

Nowadays the identification of the Ultimate Beneficial Owner (UBO) of corporate entities has become a fundamental requirement within the international regulatory framework aimed at ensuring transparency of ownership structures, preventing money laundering, terrorist financing, tax evasion, and the misuse of legal entities for illicit purposes.

The concept of the beneficial owner addresses the distinction between the legal owner of a company — as formally recorded in corporate registers — and the natural person who ultimately owns, controls, or benefits from the entity.

A significant milestone was the establishment in 1989 of the Financial Action Task Force (FATF/GAFI), the international body responsible for developing global standards for combating money laundering and related financial crimes.

The FATF Recommendations issued in 2003 formally introduced the requirement for financial institutions and other obliged entities to identify the beneficial owner of customers that are legal persons or legal arrangements. The objective was to ensure that regulated entities could determine the individuals who ultimately exercise ownership or control, rather than relying solely on formal shareholder information.

Within the European Union, the identification of beneficial ownership became an essential component of the Anti-Money Laundering regulatory framework.

Italy implemented the European anti-money laundering framework through a progressive series of legislative measures, introducing the concept of the “titolare effettivo” (beneficial owner), requiring obliged entities to identify the natural person who ultimately owns or controls a legal entity.

Companies and other legal entities are required to disclose information regarding their beneficial owners in order to ensure transparency and allow competent authorities and obliged entities to identify the individuals exercising ultimate ownership or control.

According to the Italian law, a beneficial owner is the individual who directly or indirectly owns a participation exceeding 25% of the share capital; the individual who exercises control over the entity through other means, including voting rights, contractual arrangements, shareholders’ agreements, or de facto control mechanisms; where no individual can be identified through the above criteria, the person who ultimately exercises powers of administration or management.

The underlying principle is that corporate structures must not be used to conceal the identity of individuals who exercise effective control or derive economic benefit from an entity.

From a practical viewpoint there are situations that require the UBO to be disclosed to the authorities and to the professionals involved (lawyers, accountants, notaries) in cases of purchase of real estate and company incorporation, and this is the crucial point: The more professionally and carefully the concealment structure has been devised, the more challenging it will be to identify the Ultimate Beneficial Owner (UBO).