The order of operations in an ownership chart decides whether a review finds two beneficial owners or none.
Multiply the percentages along each chain of ownership, then add the chains together. A person who holds 60 per cent of a holding company that owns 35 per cent of the customer has an indirect interest of 21.0 per cent through that chain; add a direct 8.0 per cent and another 8.0 per cent through a second holding company and the total is 37.0 per cent, above the 25 per cent threshold, although no single chain reaches it.
Worked in full in The EU AML Handbook by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
The AMLR, Regulation (EU) 2024/1624, defines beneficial ownership through an ownership interest of 25 per cent or more of the shares or voting rights, held directly or indirectly, and says how to compute the indirect part: multiply along the chain of intermediate entities and add up the results of the different chains. Control through other means is a separate limb and is tested as well. The arithmetic is simple. What goes wrong is the order of operations.
A fictional customer, Target, has four shareholders of record and a free float. Three individuals sit above it, two of them through more than one holding company.
| Holder of Target | Stake in Target | Owned by |
|---|---|---|
| X, directly | 8% | X |
| HoldCo A | 35% | X 60%, Y 40% |
| HoldCo B | 20% | X 40%, Z 60% |
| HoldCo C | 25% | Y 50%, Z 50% |
| Free float | 12% | Dispersed |
| Total | 100% |
Indirect interest through a chain = product of the stakes at every link
X through A: 60% × 35% = 21.0%. Through three layers it is three factors: 60% × 50% × 35% would be 10.5%.
In Excel, with the stakes of one chain in a row: =PRODUCT(B2:D2)
| Chain | Calculation | Interest in Target |
|---|---|---|
| X direct | 8% | 8.0% |
| X via HoldCo A | 60% × 35% | 21.0% |
| X via HoldCo B | 40% × 20% | 8.0% |
| Y via HoldCo A | 40% × 35% | 14.0% |
| Y via HoldCo C | 50% × 25% | 12.5% |
| Z via HoldCo B | 60% × 20% | 12.0% |
| Z via HoldCo C | 50% × 25% | 12.5% |
Total interest = sum of the chain products for that person
In Excel, with a person column beside the chain table: =SUMIF(Person,"X",Interest)
| Person | Largest single chain | Aggregated | 25% test | 15% test |
|---|---|---|---|---|
| X | 21.0% | 37.0% | Yes | Yes |
| Y | 14.0% | 26.5% | Yes | Yes |
| Z | 12.5% | 24.5% | No | Yes |
X and Y are beneficial owners by ownership. Between them they account for 63.5 per cent of Target. Z, at 24.5 per cent, misses the threshold by 0.5 points, and that gap is the reason Z's position needs a second look under the control limb, not a reason to stop looking.
A review that tests each chain against 25 per cent, which is what happens when the analyst works down an ownership chart one branch at a time, finds nobody. X's largest chain is 21.0 per cent, Y's is 14.0, Z's is 12.5. The file records that no natural person reaches the ownership threshold, falls back to the senior managing official, and two beneficial owners holding 63.5 per cent of the customer are never identified. The structure needs no concealment for this to happen; it only needs two intermediate companies.
A second error comes from attribution by majority: crediting a person with the whole stake of any intermediate they hold more than 50 per cent of, and nothing otherwise. That rule gives X 43.0 per cent (8 direct plus all of HoldCo A's 35), Z 20.0 per cent through HoldCo B, and Y nothing at all, because 40 and 50 per cent are not majorities. Y, a beneficial owner at 26.5 per cent, disappears. Majority is a useful test of control over an intermediate; it is not a way to compute ownership of the customer.
| Change | Result |
|---|---|
| X holds 50% of HoldCo A instead of 60% | X at 33.5% |
| X holds 30% of HoldCo A | X at 26.5% |
| Y's stake in HoldCo C that still reaches 25% | 44% |
| Z's stake in HoldCo C needed to reach 25% | 52% |
| Threshold lowered to 15% | X, Y and Z all qualify |
Two points of HoldCo C moving from Y to Z would make Z a beneficial owner. Shareholdings in private holding companies change without the customer telling anyone, which is why the computation belongs in the periodic review and not only at onboarding. The AMLR also allows the threshold to be lowered to 15 per cent for categories of entity identified as higher risk; on this structure that adds Z, and the same multiplication is all it takes to see it.
Keep the chain table, not just the answer. A file that records "X, 37.0 per cent" cannot be re-tested when one stake changes. A file that records seven chains and their products can be updated in a minute and shows a supervisor exactly how the conclusion was reached.
Multiply down, then add across, and only then compare with 25 per cent. On this structure the order of those three steps is the difference between two beneficial owners and none. The beneficial ownership worksheet is among the printable documents on the free companion page for the book, and the staffing of the periodic reviews that should re-run it is costed in a related article.
Yes. The AMLR multiplies the holdings along each chain of intermediate entities and adds the results of the different chains, and direct holdings count as a chain of one. A person with 8 per cent directly, 21.0 per cent through one holding company and 8.0 through another holds 37.0 per cent, a beneficial owner above the 25 per cent threshold.
Multiply the two stakes: 60 per cent times 35 per cent gives an indirect interest of 21.0 per cent. Treating the 60 per cent as control and attributing the whole 35 per cent overstates it; on the fictional structure here that majority shortcut gives X 43.0 per cent and drops Y, a 26.5 per cent owner, entirely.
The firm must still consider control by other means, and only where no beneficial owner can be identified does it record the senior managing official. That fallback is often reached wrongly: testing each chain separately here finds a largest chain of 21.0 per cent and misses two owners holding 63.5 per cent between them.
This article is one calculation from The EU AML Handbook. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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