How to comply with MLR-2017 reg 5(1)(a) on UBO screening
MLR-2017 reg 5(1)(a) defines a beneficial owner as any individual with >=25% effective ownership or control of a corporate customer. To comply:
1. **Identify the corporate customer's beneficial owners.** Walk the Companies House PSC tree starting from the customer entity. Recurse into corporate PSCs up to a sensible depth (5 levels covers >99% of UK structures). At each leaf-individual node, multiply the lower-bound stake bands through the chain. Any individual with combined effective stake >=25% is a UBO.
2. **Apply reg 5(1)(c) for control-natures.** Beyond pure ownership, the regulation captures individuals with the right to appoint or remove directors, significant influence over decisions, or control of voting rights. These qualify as UBOs regardless of share %. Companies House records this in the `naturesOfControl` field.
3. **Verify each UBO's identity.** Standard CDD applies: name, date of birth, nationality, address, photo ID. For corporate clients with multiple UBOs, the practice typically captures each UBO's verification before the engagement letter.
4. **Screen each UBO against sanctions + PEP + adverse media.** This is the load-bearing step for ongoing exposure. A sanctioned UBO at a corporate counterparty is a sanctioned counterparty, regardless of how layered the structure.
5. **Document the walk.** The audit trail must show: the company number screened, the depth walked, the resolved UBOs with their effective stakes, the screening result for each UBO, the list-version timestamps. The Stratum CH-watch + sanctions-screening composition produces this as a hash-bound PDF for MLR-2017's 7-year retention.
6. **Re-walk on material change.** Annually at minimum, more frequently for high-risk clients. The PSC tree changes when shares are transferred, directors are appointed, or new control rights are granted.
Common failure modes: missing the cycle (Company A → Company B → Company A); stopping at the first leaf-individual without computing aggregate stake; failing to capture control-natures separately from share %; not retaining the list-version timestamps.
Last updated 2026-05-06.