Due Diligence

Look-Through Approach

The look-through approach in KYC and AML means not stopping at the legal person or account holder in front of you. The firm traces through each intermediate layer, whether a holding company, trust, partnership, nominee, omnibus account or feeder fund, until it reaches the natural persons who ultimately own or control the customer, or on whose behalf the relationship is being established. It is how the beneficial-ownership rules in the FATF standards and in national regulation are applied in practice, and it is central to investor due diligence in funds, where the name on the register is often not the person whose money it is.

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Regulators describe the approach without always using the phrase. MAS Notice SFA04-N02 (30 June 2025) requires a Singapore capital markets intermediary, where a customer is a legal person, to identify the natural persons who ultimately own it, then, where there is doubt whether those owners are the beneficial owners or no natural person owns it, the natural persons who ultimately control it, and failing that the persons with executive authority (paragraph 6.14(a)); for a trust it must identify the trust relevant parties and any natural person exercising ultimate ownership, control or effective control "including through a chain of control or ownership", together with every legal person or arrangement along that chain (6.14(b)). The firm must also understand the customer's ownership and control structure (6.15). MAS Notice VCC-N01 imposes the same cascade on variable capital companies (paragraphs 7.13 and 7.14), and its Guidelines say ownership may be assessed against a threshold such as more than 25 per cent, "taking into account any aggregated ownership for companies with cross-shareholdings" (Guidelines 7-7-2), while someone below the threshold who controls the customer through significant influence is still a beneficial owner (7-7-3).

The same idea runs through other regimes. The UK Money Laundering Regulations 2017 define a beneficial owner of a body corporate as an individual who ultimately owns or controls, "whether directly or indirectly", more than 25% of its shares or voting rights, or otherwise controls it (regulation 5(1)(b); the definition does not apply to a company listed on a regulated market), and require the firm to take reasonable measures to understand the ownership and control structure of the customer and of any beneficial owner that is itself a legal person or arrangement (regulation 28(3A) and 28(4)(c)). The US Customer Due Diligence Rule defines a beneficial owner as each individual who "directly or indirectly" owns 25 percent or more of the equity interests of a legal entity customer, plus a single individual with significant responsibility to control, manage or direct it (31 CFR 1010.230(d)). The FATF Recommendations, as amended June 2026, set the international standard behind all of these, and FATF's March 2023 guidance on beneficial ownership of legal persons addresses the multi-layered structures that make the approach necessary.

Three situations where funds look through

1. Ownership chains. An investor that is a company owned by other companies is traced layer by layer, and indirect holdings are multiplied along each path and aggregated across paths. If an individual owns 40 per cent of a holding company that owns 70 per cent of the investor, the individual holds 28 per cent indirectly and crosses a 25 per cent threshold even though no single layer looks decisive. Where the chain ends in a trust, the trust's relevant parties are identified instead of applying a percentage; see beneficial owners of a trust.

2. Nominees, distributors and omnibus accounts. A nominee or a distributor subscribing in its own name holds the legal title, but the Guidelines to MAS Notice VCC-N01 (2-3(a)) say the beneficial-owner measures should focus on the underlying investors, the persons on whose behalf the distributor establishes the relationship. The look-through may be dispensed with where the intermediary itself qualifies for an exemption, for example an MAS-supervised or FATF-supervised financial institution (VCC-N01 7.15; SFA04-N02 6.16); otherwise the firm must perform CDD, or where the conditions are met simplified CDD, on the underlying investors, or rely on the distributor as a third party under the Notice's reliance provisions. The Guidelines to SFA04-N02 (2-3(b)) take a similar line where a distributor uses omnibus accounts: where the distributor is an MAS-supervised or FATF-supervised financial institution, the firm should obtain its confirmation that it is responsible for the AML/CFT checks on the underlying investors.

3. Funds investing in funds. Where the investor is itself a fund, the firm asks who manages it. Both Singapore Notices exempt an investment vehicle whose managers are MAS-regulated or FATF-supervised financial institutions from beneficial-owner inquiry (SFA04-N02 6.16(e); VCC-N01 7.15(e)), subject to there being no doubts or suspicion and, where the manager is a foreign FATF-supervised institution, to documenting the basis for that determination (SFA04-N02 6.17; VCC-N01 7.16). The exemption does not cover a fund the firm itself manages as primary manager unless its interests are distributed by a supervised financial institution (SFA04-N02 6.16, footnote 6). A fund managed by an unregulated manager, or a personal investment company, gets the full look-through.

Not the same as the securities-law look-through

US fund lawyers use "look-through" in a different sense. Under section 3(c)(1) of the Investment Company Act, a company that owns 10 per cent or more of a private fund's voting securities and is, or but for the 3(c)(1) or 3(c)(7) exception would be, an investment company is looked through to its own holders when counting the fund's 100 beneficial owners, or 250 for a qualifying venture capital fund (section 3(c)(1)(A)). That test is about eligibility and investor counting, not money laundering, although the data collected for one often serves the other. See our guide to qualified purchasers and 3(c)(7) funds.

In practice the look-through approach is a documentation exercise as much as an analytical one. The file should show the structure chart, the percentage held at each layer, the calculation of each indirect holding, the exemption relied on for any layer not traced further and the evidence for it, and the identity verification of each natural person reached. Our guide to UBO discovery in complex corporate structures walks through the method, and the UBO threshold lookup compares the thresholds that apply in different jurisdictions. For how the approach fits the Singapore fund notices see MAS Notice VCC-N01 explained and MAS Notice SFA04-N02 for fund managers.

Key points

Trace through every intermediate layer to the natural persons who ultimately own or control the customer
Multiply indirect holdings along each path and aggregate them; control counts even below the threshold
Nominees, distributors and omnibus accounts: focus on the underlying investors unless the intermediary is exempt
Document each layer, each calculation and each exemption relied on

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Frequently asked

What does look-through mean in KYC?+

It means tracing through the legal entities, trusts, nominees or accounts that sit between the firm and the people behind a customer, until the natural persons who ultimately own or control the customer, or on whose behalf it acts, have been identified and verified.

How are indirect holdings calculated under a look-through approach?+

By multiplying the percentages along each ownership path and adding the results across paths. A person holding 40 per cent of a company that holds 70 per cent of the customer holds 28 per cent indirectly. The Guidelines to MAS Notice VCC-N01 refer to a threshold such as more than 25 per cent, taking into account aggregated ownership for companies with cross-shareholdings, and the UK and US rules both count ownership held directly or indirectly.

When can a firm stop looking through?+

When the layer it has reached qualifies for an exemption, typically a listed company, a financial institution supervised for AML/CFT to FATF-consistent standards, or an investment vehicle managed by one, and the firm has documented the basis and has no doubts or suspicions. Otherwise it continues to the natural persons.

Does the look-through approach apply to nominee and omnibus investors?+

Yes. The intermediary is the legal customer, but the beneficial-owner measures focus on the underlying investors on whose behalf it holds the interests. Where the intermediary is itself an exempt, supervised financial institution, the firm may rely on its confirmation that it is responsible for the checks.

Is the AML look-through the same as the Investment Company Act look-through?+

No. The securities-law look-through under section 3(c)(1)(A) counts the holders of a 10 per cent corporate investor towards a private fund's 100-holder limit. The AML look-through identifies the natural persons who own or control an investor. They use similar data but serve different rules.

Sources

This entry is general information, not legal advice. Check the current text with the regulator before relying on it.

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