As a federally-regulated MSB, Telpay must comply with FINTRAC’s Know Your Client (KYC) requirements. We are required to identify, validate and report on the companies and its authorized individuals who will be using our payment services. This includes ID verification and supplemental information such as beneficial direct and/or indirect ownership.
What is a Beneficial Owner?
Beneficial owners are persons who directly or indirectly own or control 25% or more of a corporation or partnership, or who are the trustees and known beneficiaries and settlors of a trust. Beneficial Owners cannot be other corporations, trusts, or other entities.
Examples of Beneficial Owner Structure
There are many different structures of a business’ beneficial ownership - direct, indirect, and multi-level indirect relationships.
The following are a couple of scenarios to help illustrate ownership, control, and structure.
Scenario 1: Company A - Simple Share Structure
- Direct Owner-Person 1 owns 30% shares of Company A
- Indirect Owner-Person 2 owns 100% of Company B which owns 70% shares of Company A
Who are the ultimate Beneficial Owners of Company A with 25% or more control?
In this example, Person 1 (owns 30%) and Person 2 (owns 70%) would be reported as Beneficial Owners.
Scenario 2 - Company Z - Multi-level Indirect Share Structure
- Direct Owner-Person 1 - owns 70% shares of Company Z
- Indirect Owner-Person 2
- owns 100% shares of Company B which owns 10% shares of Company Z
- owns 80% shares of Company C which owns 20% shares of Company Z
How to calculate shares in Company Z
(10% Company Z x 100% Company B) + (20% Company Z x 80% Company C) = 26%
Indirect Owner-Person 2 total shares for Company Z is 26%
- Indirect Owner-Person 3
- owns 20% shares of Company C which owns 20% shares of Company Z
How to calculate shares in Company Z
(20% Company C x 20% Company Z) = 4%
Indirect Owner-Person 2 total shares for Company Z is 4%
Who are the ultimate Beneficial Owners of Company Z with 25% or more control?
In this example, Person 1 (owns 70%) and Person 2 (owns 26%) would be reported as Beneficial Owners.
