All businesses in France – from fintechs and banks to retail stores – are required to verify their customers' beneficial owners before entering into business relationships with them. Therefore, it is important for all businesses to know what beneficial owners are and how to verify them. In addition, businesses in France need to know the laws that regulate beneficial owners and any exceptions to these requirements.

In this article, we explain beneficial owners, including why they must be verified and how businesses can do so.

Key takeaways

• A business's beneficial owner is the individual who controls the business. This can be through ownership of shares, voting rights, or control over management. A business can have multiple beneficial owners.
  
• French businesses and foreign businesses that are established in France must declare their beneficial owners to help prevent money laundering and the financing of terrorism.
  
• Certain professionals – especially those in finance – must verify their customers' beneficial owners before doing business with them. This is a necessary part of the Know Your Customer (KYC) process.
  
• To verify customers' beneficial owners, professionals subject to anti-money laundering requirements must consult the Register of Beneficial Owners (Registre des bénéficiaires effectifs, or RBE) and certain official documents, such as Kbis business registration forms and company bylaws.
  

What is a beneficial owner?

"Beneficial owner" is a legal term that refers to an individual who – directly or indirectly – controls a business and gains most of its financial benefits. The beneficial owner is the actual owner of the legal entity but can be obscured by complex ownership structures (e.g., holdings, trusts) or the use of nominees.

According to Article R561-1 of the Monetary and Financial Code, individuals must meet one of the following criteria to qualify as beneficial owners:

• Own more than 25% of a business's shares or voting rights
  
• Control the business's management, administration, or governance or the general meeting of partners or shareholders
  

Businesses can have multiple beneficial owners. If no one meets the ownership or control criterion, the business's legal representative – such as the manager or chairperson – is considered the beneficial owner by default.

Note: If another business owns the business's shares, ownership must be traced back to an individual who ultimately owns them. The goal is to identify the individual with control over the business.

What are the differences among beneficial owners, legal representatives, and agents?

A business's legal representatives are not necessarily its beneficial owners. They only become its beneficial owners by default if no other person can be identified. Legal representatives' primary roles are to manage the business. This includes determining its strategy, signing contracts, and representing the business in court. They are designated in the business's bylaws.

On the other hand, beneficial owners maintain control over businesses through ownership of 25% of shares, voting rights, or control of management. They receive profits from businesses without having to serve as corporate officers.

Agents only intervene to execute specific tasks – typically one-time assignments or appointments – on another's behalf. Their role is typically temporary.

Why is it necessary to identify a business's beneficial owner?

It is necessary to identify a business's beneficial owner or owners to help maintain financial transparency and prevent money laundering, tax evasion, and the financing of terrorism. Identifying a business's beneficial owner or owners helps identify the actual owners behind legal structures. This can help prevent illegal money movements in Europe (e.g., using dummy corporations to obscure the origin or destination of funds).

French businesses and relevant contractors are legally required to identify beneficial owners, according to the Anti-Money Laundering Directive (EU) 2015/849. The directive was transposed into French law in Articles L561-45 et seq. of the Monetary and Financial Code. Businesses that fail to declare their beneficial owners – as required by law – risk severe penalties that can harm their brand images and halt their business operations. Penalties can include the following:

• A €200,000 fine imposed on the legal representative, ban on managing businesses, and partial loss of civil and political rights
  
• A €1,000,000 fine imposed on the business, plus additional sanctions (e.g., dissolution, supervision, closure, ban on participation in public contracts)
  

What are the requirements for a business's beneficial owners?

Specifically, the law requires businesses headquartered in France or in other countries with establishments in France to declare their beneficial owners upon registration and any time the beneficial owner changes. This requirement applies to the following:

• Commercial businesses, including a public limited company (société anonyme, or SA), simplified joint-stock company (société par actions simplifiée, or SAS), single-shareholder simplified joint-stock company (société par actions simplifiée unipersonnelle, or SASU), limited partnership with shares (société en commandite par actions, or SCA), limited liability company (société à responsabilité limitée, or SARL), limited partnership (société en commandite simple, or SCS), and general partnership (société en nom collectif, or SNC)
  
• Civil companies, agricultural businesses, and freelancers
  
• Economic interest groupings (GIEs)
  
• Nonprofit organisations and other entities enrolled in the Trade and Companies Register (Registre du commerce et des sociétés, or RCS) and Registre national des entreprises (RNE)
  

Publicly traded businesses are exempt from the requirement. However, financial industry businesses and certain regulated professionals are required to verify businesses' beneficial owners. They must evaluate their customers' risk levels before and while doing business with them.

They can do so by consulting the Register of Beneficial Owners (Registre des bénéficiaires effectifs, or RBE) maintained by the National Institute of Industrial Property (Institut national de la propriété industrielle, or INPI) and by doing their own research. In the event of discrepancies between the RBE and information obtained from customers and other reliable sources, the business must contact the authorities.

Banks, payment and e-money institutions, investment businesses, crypto asset service providers, and insurers are all required to verify their customers' beneficial owners. Accountants, civil law notaries, lawyers, real estate and sports agents, auditors, and court-appointed officers are also required to do so, unless the customer is a publicly traded business.

Why must businesses identify customers' beneficial owners?

Verifying beneficial owners is necessary to comply with anti-money laundering laws and protect against participation in fraudulent activities. The mandatory verification is an integral part of the Know Your Customer (KYC) process, which helps businesses and professionals evaluate the security of their potential business relationships from the outset.

How can businesses verify a customer's beneficial owner?

Businesses can verify beneficial owners by consulting the INPI's register, which centralises information that businesses declare. Access to the RBE is restricted to certain authorities, professionals subject to anti-money laundering laws (e.g., lawyers, accountants, bankers), and persons who can prove legitimate interests (e.g., business partners, journalists, academic researchers).

However, consulting only the RBE is not enough to verify a customer's beneficial owner. Businesses also must cross-check the information with internal documents, public sources (e.g., media), and official sources (e.g., bylaws and contracts). This information can help determine the customer's profile and the nature of its operations.

Alternatively, businesses can outsource the task to a third party capable of identifying beneficial owners.

How Stripe Identity can help

Stripe Identity is a suite of verification tools that allows businesses to quickly and securely verify customer identities, helping them fulfil their Know Your Customer (KYC) obligations.
Stripe Identity can help you:

• Onboard customers faster: Offer a seamless, automated identity verification process that reduces friction and increases conversion during onboarding.
  
• Mitigate fraud risk: Use advanced fraud detection capabilities to identify and prevent malicious actors from creating accounts or making fraudulent transactions.
  
• Improve operational efficiency: Remove the need to manually verify identities, reducing the time and resources required to onboard new customers.
  
• Configure the experience: Easily integrate Identity into your existing user experience and configure your verification methods and fallbacks.
  
• Scale with confidence: Stripe Identity's robust infrastructure can handle high-volume verification requests as your business grows – without adding operational overhead.
  

Learn more about how Identity can help you onboard customers securely and easily, or get started today.

FAQs about verifying beneficial owners