27 – 02 – 2025

Beneficial Ownership – How difficult could it be?

Why Beneficial Ownership Registers can’t be trusted

There are several reasons why you, as an AML officer, can’t rely entirely on the content of beneficial ownership registers. Beside the obvious reason that the AML legislation require that you verify the information through independent sources, we have the following reasons:

If someone has something to hide, it’s reasonable to suspect that they would supply incorrect information to the register.
People are lazy and BO definitions are complex. We often see that companies register an administrative contact as the sole BO of a company, or one of two equally sized owners. The most obvious explanation to this is that they haven’t bothered to figure out who the beneficial owners are.
For medium-sized to large ownership structures, it can be difficult to obtain/maintain full oversight over the ownership structure
It can be difficult to identify the correct beneficial owners, even when you know the complete ownership structure and have a complete overview over the legal framework

In this blog post, we will look at an example illustrating the last point.

Karl Johans gate 21 ANS

Usually, we use anonymized examples in public postings. This time we make an exception, since the Beneficial owner is a publicly well-known person in Norway.

The definition of beneficial owner in the Norwegian BO register legislation can be summarized as:

A person owning more than 25% of the shares or more than 25% of the voting rights of a company (direct ownership), or
A person controlling a number of entities, where these entities, together with the person himself, owns more than 25% of the shares or voting rights in the company, where control is obtained through 50% or more of the voting rights in a company (indirect ownership), or
A number of other ways to control an entity, among them various roles in foundations and trusts

In the example above, Victoria Eiendom AS, which is the sole owner of A/S Eiendomsutvikling clearly owns all of the company we are going to investigate – Karl Johans gate 21 ANS. Thus, if Mr. Ringnes controls Victoria Eiendom AS, he will be a beneficial owner of Karl Johans gate 21 ANS. Is this the case?

The arrows in the ownership map represent direct ownership. If voting rights and ownership are the same, the arrow will simply be labeled with the ownership percent. When they differ, ownership is prefixed with o: and voting rights with v:

Ringnes has 5% of the voting rights in Ringnes Holding AS. The remaining 95% of the voting rights are owned by the company itself. By definition (and explicit legislation in Norway), the self owned voting rights can’t vote. Thus, Ringnes has all outstanding voting rights and control the company, even though he only holds 0.38% of the shares.

Next, Mr Ringnes is the chairman of the board for the foundation C Ludens Ringnes Stiftelse. This is considered control in the relevant legislation.

Mr Ringnes also trivially controls Tyns-Ring AS.

In sum, Ringnes Holding AS, C Ludens Ringnes Stiftelse and Tyns-Ring AS, all controlled by Mr. Ringnes, own 49.52% of Victoria Eiendom – a bit too little for control. However, the company owns 2.48% of itself. Again, these shares should be removed from the equation when we look for control: 49.52/(100-2.48) = 50.78%. This shows that Mr Ringnes, in BO context, controls Victoria Eiendom and thus becomes a beneficial owner of Karl Johans gate 21 ANS.

Can we expect reporting entities to be able to figure this out by themselves?

Below, you will find an ownership map for the same company, where all entities not included in the Beneficial Owner map above have been anonymized. People familiar with T-rank shareholder maps will easily spot Mr. Ringnes as a Beneficial Owner due to his Voting Power, but if you disregard Voting Power, would you have quickly identified Mr. Ringnes as the Beneficial Owner?

Written by Svein Parnas – svein (at) trank (dot) no