Beneficial Ownership Threshold

What the beneficial ownership threshold actually is

The beneficial ownership threshold is the ownership percentage at which anti-money laundering law requires a legal entity to identify a specific individual as a beneficial owner, someone whose stake is large enough that regulators want to know who they are. Across most major frameworks, that number is 25%.

The consistency is somewhat misleading. Several different regulations independently arrived at or adopted 25% as a threshold, but they’re not the same rule, don’t apply to the same people, and don’t carry the same consequences. Treating “the 25% rule” as a single, unified requirement is one of the more common mistakes in how this topic gets discussed.

Why 25% became the default number

There’s no single origin story for why 25% specifically became the default. FATF’s own standards don’t fix a number; Recommendation 10’s interpretive note leaves the specific percentage to national implementation, describing only a “controlling ownership interest” in general terms. In practice, 25% emerged as a working consensus across the countries and institutions that had to pick an actual number, low enough to catch a meaningfully large stake, high enough to avoid requiring identification of every minor shareholder in a company with dispersed ownership.

Once major frameworks, the EU’s early anti-money laundering directives, FinCEN’s rules, the UK’s approach, converged on 25% independently, it became the de facto international standard, even without a single treaty or FATF recommendation mandating that exact figure.

The ownership prong vs the control prong

Most beneficial ownership rules built on the 25% threshold also include a second, separate test that doesn’t depend on ownership percentage at all. FinCEN’s framework calls these the ownership prong and the control prong. The ownership prong catches anyone who owns 25% or more of the entity’s equity. The control prong catches a single individual with significant responsibility to manage or direct the entity, a CEO, CFO, or equivalent, regardless of how much or how little equity they actually hold.

A legal entity can have beneficial owners under either test, both, or in some structures, only the control prong, if ownership is split broadly enough that no individual crosses 25% on their own.

FinCEN’s CDD Rule: 25% for banks checking their customers

FinCEN’s Customer Due Diligence Rule requires banks and other covered financial institutions to identify beneficial owners of their legal entity customers at account opening. Here, 25% is the ownership prong threshold set out in 31 C.F.R. § 1010.230, and FinCEN has been explicit that it’s a baseline institutions may lower based on their own risk assessment, not a ceiling.

This version of the threshold is a bank-side obligation. It’s about what a financial institution has to ask its own customers when opening an account, not about what a company itself has to report directly to a regulator.

The Corporate Transparency Act: 25% for companies reporting to FinCEN directly

A separate 25% threshold sits inside the Corporate Transparency Act, enacted as part of the Anti-Money Laundering Act of 2020, which originally required companies themselves to report their beneficial owners directly to FinCEN, not to a bank. This is the Beneficial Ownership Information reporting requirement, BOI reporting, codified at 31 U.S.C. § 5336 and 31 C.F.R. § 1010.380, and it uses the same 25%-ownership-or-control test as the CDD Rule.

Here’s where this needs to be current rather than repeating outdated information still common online: as of FinCEN’s interim final rule published 26 March 2025, entities formed in the United States, previously called domestic reporting companies, and US persons are exempt from this reporting requirement entirely. Only entities formed under foreign law that have registered to do business in a US state or tribal jurisdiction, previously called foreign reporting companies, still have to file. The Eleventh Circuit upheld the underlying Corporate Transparency Act as constitutional in a 16 December 2025 decision, but that exemption for domestic companies remains in force, and FinCEN has stated it will not enforce penalties against US companies or US persons under the current rule. A final rule addressing the scope permanently was still pending as this was written.

These are not the same requirement

The CDD Rule and the Corporate Transparency Act’s BOI reporting requirement get conflated constantly, partly because they share the same 25% number and partly because both involve the phrase “beneficial ownership.” They are not the same requirement:

A bank still has to identify beneficial owners of its business customers under the CDD Rule regardless of the Corporate Transparency Act’s 2025 changes. The two obligations are independent of each other, and the narrowing of one doesn’t affect the other.

UK’s 25% threshold: the PSC register

The UK’s equivalent is the People with Significant Control, PSC, register, which also uses a 25% threshold, aligned deliberately with the same benchmark used elsewhere internationally. A person with significant control includes anyone holding more than 25% of shares or voting rights, or who otherwise has the right to exercise significant influence or control over the company. UK companies must maintain this information and file it with Companies House, making it, unlike the current US position, a genuinely public register.

EU law: a baseline, not a fixed ceiling

EU law treats 25% as a baseline rather than a fixed number every member state must use identically. The Anti-Money Laundering Directives set 25% as the reference threshold, but individual member states can, and in some cases have, set lower thresholds domestically, particularly for higher-risk entity types. The EU’s beneficial ownership registers, implemented at the member-state level, generally reflect this same baseline with local variation.

Can the threshold be set lower than 25%?

Every major framework treats 25% as a floor, not a fixed rule that can’t be adjusted downward. Financial institutions applying the CDD Rule can, and in higher-risk situations often do, apply a lower percentage based on their own risk assessment. The logic is straightforward: a jurisdiction or institution that judges a particular customer type as higher risk can reasonably decide that a 10% or 15% stake also warrants identification, even though the regulatory baseline sits at 25%.

What happens when no one meets the threshold

Ownership structures don’t always produce a clean beneficial owner under the ownership prong. A company with ownership split evenly across six shareholders, each holding roughly 16.7%, has no one crossing 25% on their own. This is exactly why the control prong exists as a backstop: even where no individual meets the ownership threshold, institutions and reporting companies still have to identify at least one individual with significant managerial control, ensuring a beneficial owner is identified under almost every realistic ownership structure.

Getting the threshold question right in practice

Getting this right in practice means being precise about which threshold applies to which obligation, rather than treating “25%” as a single fact to memorise. A compliance team should be able to state clearly which rule they’re applying, the CDD Rule for a bank’s own customer file, the Corporate Transparency Act for a company’s own FinCEN filing obligation, or a UK or EU equivalent, and cite the specific regulation, not just the percentage.

Frequently asked questions

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