A beneficial ownership is a trust arrangement whereby the beneficial owner of a security has the power to vote on and influence decisions regarding that security, and receives the benefit afforded by the security, even though in street name the security may be held by someone other than the true owner, such as a broker, for safety or convenience reasons.
In international commercial law, a beneficial ownership is the natural person behind a legal entity or arrangement. Knowing the identity of the natural persons behind legal entities and arrangements helps certain jurisdictions preserve the integrity of their own tax system. Transparency of ownership of legal entities and arrangements is also important in fighting other financial crimes, such as corruption, money laundering, and terrorist financing, so that the real owners cannot disguise their activities and hide their assets from law enforcement authorities using layers of legal structures spanning multiple jurisdictions.
See also: Voting trust; Trust beneficiary
[Last updated in February of 2022 by the Wex Definitions Team]
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