The 25% ownership threshold is the level of ownership at which a person must be identified as a beneficial owner of a business customer. Under the US Customer Due Diligence rule, a beneficial owner includes each individual who, directly or indirectly, "owns 25 percent or more of the equity interests of a legal entity customer" (31 CFR 1010.230(d)(1)).
Why it matters in KYB review
The threshold decides how many people must be identified and verified. At 25% or more, at most four people can qualify, which is why the rule's own note says "up to four individuals may need to be identified" under the ownership prong. If nobody reaches 25%, the ownership prong returns no one, and only the control person is recorded. The rule also allows institutions to identify additional individuals "on the basis of risk," so the threshold is a floor for the legal minimum and a policy choice above that.
What an analyst checks
- Direct and indirect stakes. Indirect ownership counts. Multiply percentages down each chain and add up a person's stakes across chains. (Illustrative: Daniel Okafor owns 52% of Northgate Holdings Ltd, which owns 60% of Kestrel Freight Ltd, so he holds an indirect 31.2% of Kestrel and is a beneficial owner.)
- Equity versus votes. The US prong measures equity interests. Voting control without equity is a control question, not an ownership one.
- The exact test in each jurisdiction. The US uses "25 percent or more." The UK PSC regime uses "more than 25%" of shares or voting rights (GOV.UK). A person with exactly 25% is a beneficial owner under the US rule and may not be a PSC.
- Just-below stakes. Four holders at 24.9%, or a stake that fell from 30% to 24% just before the application, deserve a question.
- Family and related holdings. Spouses, relatives or associated companies each under 25% but acting together can amount to one controlling interest.
Common pitfalls
- Only counting direct shareholders. The rule's language, "directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise," reaches beyond the share register.
- Rounding. 24.96% displayed as 25% or vice versa changes the answer. Use the underlying numbers.
- Mixing up thresholds. OFAC's 50 percent rule treats an entity owned 50% or more in the aggregate by blocked persons as blocked (OFAC FAQ). A 30% owner who is sanctioned still matters to the KYB file even though the entity is not automatically blocked.
- Treating 25% as a safe harbor. A risk-based program can and often should go lower for high-risk customers.
Related terms
Ultimate beneficial owner, control person, nominee director, periodic review (perpetual KYB).
How Sweat AI fits
Sweat AI's reviews show the ownership math behind every beneficial owner, with the source for each percentage, so your team can check the calculation before deciding. See KYB review.
Questions
Is 25% a ceiling on what an institution may collect?
No. The CDD rule lets a covered institution identify additional individuals if it deems it appropriate on the basis of risk. A program can set a lower threshold, for example for high-risk customers.
Is the 25% threshold the same as OFAC's 50 percent rule?
No. The 50 percent rule is a sanctions concept: an entity owned 50% or more in the aggregate by blocked persons is itself treated as blocked. Both apply to the same file: one decides who must be identified, the other whether the entity itself is blocked.
Sources
- 31 CFR 1010.230, Beneficial ownership requirements for legal entity customers (eCFR), accessed 2026-09-30
- GOV.UK, People with significant control (PSCs), accessed 2026-09-30
- OFAC, FAQs on entities owned by blocked persons (50 Percent Rule), accessed 2026-09-30