Natural Person
Overview
A natural person refers to an individual human being with legal rights and obligations, as opposed to a legal entity such as a corporation. In compliance, distinguishing between natural persons and legal entities is essential for KYC, KYB, and beneficial ownership checks. Regulators require financial institutions to identify natural persons behind legal structures, ensuring that shell companies are not misused for illicit activity.By recognizing ultimate beneficial owners (UBOs), institutions can apply appropriate due diligence measures. Natural persons are also the primary subjects of sanctions, PEP screening, and adverse media monitoring. Accurately identifying them helps prevent money laundering, terrorism financing, and fraud.
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FAQ
What is a natural person?
A human individual with legal rights and responsibilities.
Why is it important in compliance?
To distinguish individuals from companies and identify UBOs.
Who must identify natural persons?
Banks, fintechs, and regulators under AML/KYC frameworks.
How are they verified?
Using government IDs, registries, and KYC processes.