COSOB Guidelines No. 01/2025 of March 27, 2024

On Identification and Verification Measures for Beneficial Owners

V 1.0

COSOB – MARCH 2025

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Table of Contents

• Introduction................................................................................................................................................ 4
• I- Legal and Regulatory References .................................................................................................... 4
• II- Importance of the Concept of Beneficial Owner.................................................................................. 4
• III- Importance of Beneficial Owner Information in Preventing Money Laundering, Terrorist Financing, and Financing of Proliferation of Weapons of Mass Destruction ................................................................................................................................................................. 4
• IV- Definitions............................................................................................................................................. 6
• V- Determination of the Beneficial Owner ................................................................................................. 7
  • V-1- Identification of Beneficial Owners............................................................................................ 7
  • V-2- Control via Ownership Structure and Other Means ............................................................. 7
    • V-2-1- Tracking Ownership and Indirect Control.................................................................................. 7
    • V-2-2- Cases of Family Businesses and Partnerships ......................................................................... 8
    • V-2-3- Control via Management, Supervisory, or General Assembly Bodies ........................ 8
    • V-2-4- Persons Acting on Behalf of the Client ................................................................................. 9
    • V-2-5- Identification of Beneficial Owners of Non-Profit Organizations ............................ 9
    • V-2-6- Identification and Verification of Beneficial Owners of Foreign Legal Structures, Including Trusts ........................................................................................................................................... 10
    • V-2-7- Identification of Beneficial Owners: Individual Clients ............................................ 12
  • V-3- Data to be Collected on the Beneficial Owner ................................................................................ 12
• VI- Risk-Based Approach ......................................................................................................... 12
  • VI-1- Risk Assessment by Client Type ....................................................................................... 13
  • VI-2- Risk Assessment Process ................................................................................................. 13
  • VI-3- Due Diligence Measures ................................................................................................... 13
  • VI-4- Enhanced Due Diligence Procedures ............................................................................... 14
  • VI-5- Reduction of Monitoring and Continuous Verification Levels of Operations ........................... 14
• VII- Verification Procedures for Information..................................................................................... 15
• VIII- Examples of Ownership and Control Structures ................................................................. 16
  • VIII-1- Control of Beneficial Owners via Different Categories of Shares ..................................... 16
  • VIII-2- Family Businesses ................................................................................................................... 16
  • VIII-3- Usufruct and Pledges.............................................................................................................. 16
  • VIII-4- Parallel Structures and Beneficial Owners .............................................................................. 17
  • VIII-5- Models of Abuse of Legal Persons ......................................................................................... 17
• IX- Training and Awareness................................................................................................................. 17
• X- Targeted Financial Sanctions................................................................................................................ 17
• XI- Indicators of Suspicion of Concealment of the Beneficial Owner............................................................ 17
• XII- Indicators of Suspicion Related to the Represented Individual ............................................................ 18
• XIII- Indicators of Suspicion Related to the Provision of False Documents and Other Behaviors.............. 19
• XIV- Actions to be Taken Upon Identification of Suspicion Indicators ...................................................... 20
• XV- Document Retention ............................................................................................................. 21
• XVI- Sanctions for Non-Compliance ........................................................................................................ 21
• XVII- Annex: Examples of Certain Forms of Ownership and Control within a Legal Person............................................................................................................................................................. 23

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Introduction

These guidelines are developed within the framework of awareness-raising actions for entities subject to the control of the Commission for the Organization and Supervision of Stock Market Operations ("COSOB"), and are aligned with current legislative and regulatory provisions. They aim to strengthen their knowledge regarding obligations for the identification and verification of beneficial owners.

They provide subject entities with practical guidance on beneficial owner identification procedures, specifically by identifying individuals who, directly or indirectly, own or control the client or their representative, exercise effective control over an entity, or on whose behalf a transaction is conducted or a business relationship is established. This framework enhances the capacity of subject entities to align their practices with international standards.

These guidelines are primarily based on Recommendations Ten (10) and Twenty-Four (24) of the Financial Action Task Force (FATF), which deal respectively with customer due diligence and the transparency of beneficial ownership of legal persons.

I- Legal and Regulatory References

• Ordinance No. 66-156 of 18 Safar 1386, corresponding to June 8, 1966, establishing the Penal Code, as amended and supplemented;
• Law No. 05-01 of 27 Dhou El Hidja 1425, corresponding to February 6, 2005, relating to the prevention and fight against money laundering and terrorist financing, as amended and supplemented;
• Executive Decree No. 25-101 of 12 Ramadhan 1446, corresponding to March 12, 2025, relating to the procedure for freezing and/or seizure of funds in the context of preventing and fighting terrorist financing and the financing of the proliferation of weapons of mass destruction;
• Executive Decree No. 23-429 of 15 Joumada El Oula 1445, corresponding to November 29, 2023, relating to the public register of beneficial owners of legal persons under Algerian law;
• Executive Decree No. 25-102 of 12 Ramadhan 1446, corresponding to March 12, 2025, fixing the composition, organization, and functioning of the committee for monitoring targeted international sanctions;
• Executive Decree No. 25-103 of 12 Ramadhan 1446, corresponding to March 12, 2025, fixing the procedures for inscription and removal from the national list of terrorist persons and entities and the effects arising therefrom;
• COSOB Regulation No. 24-01 of 11 Moharram 1446, corresponding to July 17, 2024, relating to the prevention and fight against money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction;
• COSOB Instruction No. 24-07 of November 21, 2024, carrying vigilance measures towards clients in the context of preventing and fighting money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction.

II- Importance of the Concept of Beneficial Owner

The identification and verification of the beneficial owner primarily aim to determine the natural person or persons who own or control the client or their representative and/or the natural person on whose behalf a transaction is conducted or a business relationship is established, as well as persons who exercise ultimate control over the client. This allows for appropriate and effective surveillance to make decisions based on the level of money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction risk associated with the client and the beneficial owner. Furthermore, this approach aims to collect precise information and make it available to competent authorities to prevent and counter these illicit activities, and where applicable, effectively apply sanctions provided for by current legislation.

III- Importance of Beneficial Owner Information in Preventing Money Laundering, Terrorist Financing, and Financing of Proliferation of Weapons of Mass Destruction

The absence of exact and precise information on beneficial owners facilitates the occurrence of cases of money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction, primarily through the following means:

• Concealing the identity of known or suspected criminals;
• Hiding the purpose of an account (title) or the ownership of a legal person;
• Hiding the origin or destination of funds or assets associated with a legal person;
• Use of nominees: individuals are used to conceal the identity of the beneficial owner by presenting themselves as the legitimate owners of assets or accounts;
• Shell companies: used as vehicles to pass transactions without possessing assets or conducting commercial activities, even when registered;
• Complex ownership and control structures: which make it difficult to identify the beneficial owner, especially in the presence of multiple levels of shared ownership in the name of other legal persons;
• Bearer shares or subscription warrants: These are shares or subscription warrants held by a person holding a real certificate proving that they are the owner of these shares or subscription warrants;
• Use of legal persons as administrators;
• Nominal shareholders: These are persons who own or hold shares on behalf of others, which they may do formally when the identity of real shareholders is not disclosed, if the country's legislation permits, or informally, for example, close partners and family members;
• Use of intermediaries such as lawyers and service providers for the creation of legal persons.

Criminals and criminal groups often exploit legal persons to conceal their true identity, hide illicit fund flows, and facilitate money laundering, terrorist financing, and financing of the proliferation of weapons of mass destruction. These criminal actors frequently resort to complex ownership and control structures, which complicates tracking and identifying the beneficial owner who, ultimately, owns or controls the legal person. The difficulty increases when these entities are established in multiple and diverse jurisdictions.

In this context, the precise identification of beneficial owners is of major importance at the local and international levels. This process allows subject entities to apply AML/CFT/FPDAM measures appropriately, through a risk-based approach that is both suitable and rational. By promoting transparency and traceability of beneficial owner information, institutions can significantly strengthen their capacity to combat these illicit activities.

NOTE: Although the legal forms of legal persons are defined by the Commercial Code, it may happen that certain non-resident shareholders, partners, or beneficial owners adopt forms not specifically mentioned in this law.

In such cases, due diligence must be applied to such legal persons as well as alternative structures.

It is relevant to recognize that these structures can be used to conceal the identity of beneficial owners or to circumvent regulatory obligations.

Subject entities must identify and monitor risk indicators associated with complex arrangements, such as the presence of offshore institutions, complex structures, or a lack of transparency regarding capital flows.

They are also required to put in place clear procedures for the collection and verification of information concerning beneficial owners, including strict reporting obligations.

IV- Definitions

• Legal Persons: Legal persons are:

  • The State, the Wilaya (Province), the Commune (Municipality),
  • Public administrative establishments,
  • Civil and commercial companies,
  • Associations and foundations,
  • Wakfs,
  • Any group of persons or assets to which the law recognizes legal personality;

• "Subject Entities": Stock market operations intermediaries, securities depository account keepers, collective investment schemes in securities, the Algiers Stock Exchange, the central depository (Algérie Clearing), venture capital companies, and managers of crowdfunding platforms;

• "Beneficial Owners": By beneficial owner, we mean any natural person who, ultimately, directly or indirectly:

  • Holds at least 20% of the capital or voting rights of the legal person, or exercises effective control over its management, supervisory, or general assembly bodies;
  • Holds or controls the client, whether it is a legal person, a representative, or a natural person on whose behalf transactions are conducted;
  • Exercises effective control through a majority participation or a dominant position in the concerned legal person.

In the absence of identifiable beneficial owners according to the aforementioned criteria, the senior managing official of the entity may be designated as the beneficial owner, provided that the subject institution can justify the exhaustive verification measures undertaken to identify the true beneficial owner.

• "Ownership or Control": The natural person(s) who hold, directly or indirectly, a share equal to or greater than 20% of the capital or voting rights and who exercise, by any means of fact or law, directly or indirectly, a power of control or effective or legal control over the management, administration, or executive bodies, or the general assembly, or the functioning of the legal person;

• "Client":

  • Any person or entity that establishes a business relationship with the subject entity,
  • Any person or entity that conducts occasional transactions exceeding the threshold set by the provisions of Article 15 of COSOB Regulation No. 24-01, including situations where the transaction is executed in a single operation or in several operations between which there appears to be a link,
  • Any person who conducts occasional transactions in the form of electronic transfers above the threshold set by the provisions of Article 22 of COSOB Instruction No. 24-07, including when there are multiple transactions below said threshold that appear to be linked.

V- Determination of the Beneficial Owner

The determination of the beneficial owner involves identifying the natural person or persons who control directly or indirectly the client or benefit from a transaction. This includes actions necessary to:

• Evaluate the ownership and control structure of the client (legal person), as well as representatives or beneficiaries of life insurance contracts;
• Analyze transactions conducted and business relationships established to identify the individuals behind these entities;
• Verify control mechanisms that allow certain natural persons to exercise effective control over legal persons.

This approach aims to ensure transparency and prevent any attempt to conceal identity within business relationships.

V-1- Identification of Beneficial Owners

This involves determining the identity of natural persons who, directly or indirectly, own or control a significant percentage of the capital or voting rights of the legal person. In application of current regulations, a participation of 20% is considered sufficient to determine a beneficial owner.

If no person holds at least 20% of the ownership, it is imperative to examine the management and governance structure to identify persons exercising effective control.

V-2- Control via Ownership Structure and Other Means

Subject entities must understand the ownership structure of legal persons and identify their beneficial owners.

V-2-1- Tracking Ownership and Indirect Control

Subject entities are required to carefully examine cases where ownership or control is exercised indirectly, whether by a third-party company, an intermediary, or via complex holding mechanisms (such as through other entities within the ownership structure). If control is fragmented among several natural or legal persons, it is imperative to identify the natural person or persons who, ultimately, hold or exercise effective control over the legal person.

Complex Cases: Identification Beyond Ownership Percentage

If no individual holds at least a 20% share of the company, the subject entity must thoroughly analyze control mechanisms, such as:

• Strategic decision-makers capable of influencing contracts, agreements, or decisions having a major impact on the operations or strategy of the legal person;
• Members of the board of directors or executives having the power to dismiss or appoint management members;
• Natural persons exercising control through family ties or close personal relationships;
• The power to block important decisions of the legal person;
• The right to receive at least 20% of the assets upon dissolution of the legal person.

V-2-2- Cases of Family Businesses and Partnerships

For family structures or partnerships, the subject entity must take into account implicit agreements between family members or partners. Collectively, they may hold significant control, even if individually none owns more than 20%. In this case, the subject entity must add their shares to identify the beneficial owner.

V-2-3- Control via Management, Supervisory, or General Assembly Bodies

In some cases, it is impossible to identify a beneficial owner solely by the ownership structure. In this case, the subject entity must turn to natural persons exercising effective control via the various management, supervisory, or governance bodies, namely:

• Senior executives (CEO, General Managers, etc.) who define strategic directions or make key decisions for the legal person;
• Persons exercising executive control over the daily activities of the legal person, who may influence the management and essential operations of the entity;
• Members of the supervisory board, who exercise direct supervision over management, validate major strategic decisions, or may block certain important decisions of the management;
• Members of the general assembly, particularly when they hold decision or control powers over major decisions, such as the approval of accounts, the appointment of executives, or the modification of statutes.

V-2-4- Persons Acting on Behalf of the Client

When a person is authorized to act on behalf of the client, it is necessary to verify whether they act for their own account or on behalf of a third party. In the latter case, the identity of the beneficial owner must be clarified.

Indeed, the natural person or persons for whom a transaction is executed or an activity is carried out are also considered beneficial owners, whether the client is a natural person or a legal person.

V-2-5- Identification of Beneficial Owners of Non-Profit Organizations

According to guidelines established by the Financial Action Task Force (FATF), it is essential to clearly define the beneficial owner of a non-profit organization. This definition encompasses any individual having the capacity to direct or influence the organization, whether through management, ownership, or other means of control.

In this context, it is essential to take into account the ownership structure of the organization. For example, if the organization does not generate profits and is constituted as a legal entity, subject entities are required to identify natural persons who exercise significant influence on its activities, whether through their role in the board of directors, in management, their position as founding members, or by their prerogative to prevent strategic decisions.

When the organization presents a high number of members in its structure, making it difficult to i