Beneficial Owner Registers Have Closed Worldwide, and Pharma Companies Are Verifying Counterparties in New Ways
Three years ago, verifying a counterparty took five minutes. A compliance manager would open an extract from the Unified State Register of Legal Entities (EGRUL), identify all company founders, and move on to the next deal. Today, that exact same extract might contain a single line: information restricted by law. The ultimate beneficial owner (UBO) of the company remains hidden, forcing organizations to make decisions about prospective partners without a complete picture.
For the pharmaceutical industry, this is far from an abstract compliance issue. Distributors of active pharmaceutical ingredients (APIs), logistics partners, and regional agents operating in high-risk areas are frequently exposed to sanction lists or utilized for parallel imports. If the tax authority proves that a company failed to exercise «due diligence» when selecting such a partner, back-taxes on Value Added Tax (VAT) and corporate income tax will be assessed against the buyer. Meanwhile, the counterparty’s hidden ultimate beneficial owner remains untouched by these financial consequences.
How Counterparties Were Verified Before 2022
Prior to November 2022, counterparty verification was built on the premise that a ultimate beneficial owner could always be identified via public sources. The European Union’s Fifth Anti-Money Laundering Directive (5AMLD) required member states to grant access to beneficial ownership registers to any member of the public without requiring a statement of reasons. An investigative journalist, a competitor, or a bank compliance officer enjoyed identical access levels when searching for the real owner of a Luxembourgish or German entity.
In Russia, an extract from the EGRUL traditionally disclosed the complete list of founders along with their exact equity shares. Compliance personnel primarily performed a technical function: requesting the extract, cross-referencing the data against the partner’s onboarding questionnaire, and logging the result. In-depth investigations were reserved for edge cases, such as suspected nominee directors or complex corporate chains designed to obscure the ultimate individual owner.
Commercial data aggregators—such as SPARK-Interfax or Kontur.Focus—served a secondary, supporting role in this model. They accelerated research workflows and provided graph visual analytics on corporate interconnections. However, their underlying data relied entirely on the same primary state registry. If the official register disclosed a full list of shareholders, paid platforms simply mirrored that reality. Aggregators were valued for speed, not for deep investigative capabilities, as they remained tethered to public record updates.
Russian legislation had already established legal grounds for restricting certain data prior to the current shift. Resolution of the Government of the Russian Federation No. 729, dated June 6, 2019 (hereinafter, «Resolution No. 729»), allowed companies under foreign sanctions or authorized defense contractors to restrict their EGRUL entries. Before 2022, this mechanism applied to a narrow circle of entities and had negligible impact on daily counterparty due diligence across the pharmaceutical sector.
Registers Closed, Verification Turned Multi-Layered
On November 22, 2022, the Court of Justice of the European Union (CJEU) delivered a landmark judgment in joined cases C-37/20 and C-601/20 (WM and Sovim SA v Luxembourg Business Registers), invalidating the provision of 5AMLD that guaranteed unrestricted public access to UBO data. The Court ruled that disclosing sensitive financial information to the general public without demonstrating a legitimate legal interest violated Articles 7 and 8 of the Charter of Fundamental Rights of the European Union regarding respect for private life and personal data protection.
Luxembourg, Germany, Austria, Belgium, and Ireland suspended public access to their national registers within days of the ruling. Some jurisdictions required applicants to prove a legitimate interest prior to granting access, while others temporarily shut down access even for statutory authorities during the transition phase. For a compliance specialist attempting to verify a European packaging supplier or contract manufacturer, response turnaround times expanded from a single click to weeks of administrative delay.
The Financial Action Task Force (FATF) addressed this fragmented landscape by revising its international standards. During its March 2022 plenary meeting in Paris, FATF adopted amendments to Recommendation 24, obligating countries to enforce a multi-pronged approach to UBO data collection. A single central registry was deemed insufficient. Data must now be held across at least two independent repositories simultaneously—such as a central register alongside company-held records or regulated financial intermediaries. In February 2023, FATF applied this identical framework to Recommendation 25, which governs trusts and other legal arrangements.
The United Kingdom, operating outside CJEU jurisdiction post-Brexit, maintained its Persons with Significant Control (PSC) register open to the public. However, it bolstered data verification integrity. Effective November 18, 2025, every individual listed as a PSC must complete identity verification through Companies House; failure to do so results in an unverified status warning on the public file. While public accessibility remains intact, data reliability is now reinforced by mandatory identity verification.
In the United States, regulatory trajectory took an alternative route. The Corporate Transparency Act (CTA) initially required entities registered in the US to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). On March 26, 2025, FinCEN issued an Interim Final Rule exempting domestic US entities and individuals from these reporting mandates. The reporting obligation now rests exclusively on foreign corporate entities registered to conduct business within US territory.
Across the Eurasian Economic Union (EAEU), no unified UBO registry exists. Each member state operates its own independent infrastructure. Kazakhstan launched its national Beneficial Ownership Register in 2023, governed by the Financial Monitoring Agency’s rules dated September 25, 2023. For a pharmaceutical enterprise partnering with distributors across Russia, Kazakhstan, and Belarus, compliance requires executing three distinct checks under three separate regulatory frameworks. Cross-border centralized queries are not supported.
| Parameter | Pre-November 2022 | Post 2022–2025 Standard |
|---|---|---|
| EU UBO Register Access | Public, no justification required | Legitimate interest required; response takes weeks |
| Primary UBO Data Source | Single central register | Central register + company disclosures + counterparty checks (FATF R.24) |
| US Corporate Transparency Act Scope | All entities registered in the US | Exclusively foreign entities conducting business in the US |
| Russian EGRUL Access | Complete shareholder disclosure | Restricted visibility permitted (Resolution No. 729) |
This scrutiny functions bi-directionally. Western financial institutions and logistics networks handling transactions originating from the EAEU apply heightened due diligence to payees. Consequently, Russian pharmaceutical firms must proactively prove to overseas vendors that they share no corporate links with sanctioned individuals. Closed registers compound the complexity of providing this proof for both sides of a transaction.
How to Locate a Beneficial Owner When Registers Are Silent
Russian tax law provides its own rationale for counterparty verification that operates independently of register transparency. Article 54.1 of the Tax Code of the Russian Federation sets clear boundaries for claiming tax benefits. Federal Tax Service (FTS) Letter No. ED-5-9/547@ (dated March 23, 2017) explicitly instructs tax inspectors to evaluate whether a taxpayer exercised reasonable due diligence when selecting a counterparty. FTS Letter No. BV-4-7/3060@ (dated March 10, 2021) further detailed specific due diligence indicators: business reputation, physical warehouse and production capacities, and the absence of shell company characteristics.
Federal Law No. 115-FZ dated August 7, 2001 («On Combating Legalization (Laundering) of Income Obtained by Criminal Means and the Financing of Terrorism», hereinafter — Law No. 115-FZ) defines a ultimate beneficial owner as an individual who directly or indirectly holds more than 25% of an entity’s equity capital, or otherwise exercises ultimate control over its operations. If exhaustive efforts fail to identify the true owner, the statute permits identifying the counterparty’s sole executive officer (e.g., General Director) as the UBO. This aligns with FATF’s international Senior Managing Official fallback rule: once all reasonable identification methods are exhausted, compliance teams default to executive leadership as the accountable contact.
Calculating effective equity participation across multi-tiered holdings requires multiplying ownership percentages down the corporate chain. If a non-transparent entity appears at any tier, manual calculation becomes unreliable. At that point, compliance officers should request certified organizational documents directly from the partner rather than relying on structural assumptions.
When official EGRUL records are restricted, missing background data can often be reconstructed using auxiliary Russian databases:
Pledge Registries: Filings in the Register of Pledges of Movable Property frequently expose true controlling parties, as equity shares are commonly pledged to financial institutions as loan collateral.
Judicial Filings: The Arbitr Dispute Docket (Kad.arbitr.ru) contains corporate litigation filings that regularly reveal real UBO identities and side-agreements absent from statutory registers.
Bankruptcy Registers: The Unified Federal Register of Bankruptcy Information mandates that bankruptcy trustees disclose the debtor’s controlling persons to assign vicarious liability.
Open Source Intelligence (OSINT) methodology offers additional analytical depth. Web archives often retain historical «About Us» pages that listed original shareholders prior to removal. Press releases, executive interviews, and industry publications frequently mention underlying investors even when formal registers list nominee holders. Professional networks like LinkedIn offer visibility into executive career histories and cross-company connections, helping uncover informal governance networks.
Data-mapping software platforms—such as Maltego or SpiderFoot—accelerate relationship graph construction by cross-referencing corporate data, physical addresses, and contact numbers. Additionally, negative news screening and satellite imagery reviews help confirm the physical existence of declared distribution hubs or manufacturing facilities. However, OSINT tools complement rather than replace formal document requests submitted directly to the counterparty.
A single OSINT finding is never treated as definitive proof. Compliance teams should adhere to a strict standard: a minimum of three independent sources is required to corroborate any UBO hypothesis. Relying on fewer sources yields a speculative conclusion that will not survive regulatory scrutiny.
Verifying Pharma Distributors and the Eurasian Patent Register
When evaluating pharmaceutical raw material distributors and active ingredient manufacturers, compliance teams can access an industry-specific verification tool independent of corporate registries. The Eurasian Pharmaceutical Register—maintained by the Eurasian Patent Office (EAPO) since March 1, 2021—publishes data on patent holders for active pharmaceutical ingredients (APIs) alongside registered licensing agreements. Cross-checking a vendor against official patent records uncovers intermediaries selling proprietary compounds without legitimate manufacturing rights or authorization.
Pharmaceutical distribution remains vulnerable to Trade-Based Money Laundering (TBML)—manifesting through inflated/deflated raw material pricing, phantom shipments, and layered intermediary networks designed to reroute goods into sanctioned jurisdictions. In these structures, hidden owners often shield themselves behind ancillary logistics or management-consulting contracts attached to the main commercial supply agreement.
Red flags in pharma distribution recur across transactions and require systematic review:
| Risk Category | Indicator | Mandatory Action |
|---|---|---|
| Corporate History | A distributor previously operating in IT or construction suddenly secures a major pharmaceutical supply contract. | Request GDP (Good Distribution Practice) compliance certificates and physical warehouse inspection records. |
| Documentation | Batch numbers on certificates of analysis (CoA) mismatch corresponding commercial invoices. | Execute a full supply chain audit and confirm the manufacturer’s current GMP status. |
| Logistics | Freight routes transit through non-standard intermediate jurisdictions outside logical trade corridors. | Issue a formal End-User Certificate requirement prior to dispatch. |
| Financials | Payments are processed through third-party intermediaries unconnected to the medical sector. | Verify the ultimate beneficial owner of the paying entity independently from the seller. |
| Ownership Structure | Ownership changes immediately prior to executing a high-value contract. | Trigger enhanced due diligence (EDD); lower the UBO identification threshold to 10% equity. |
Perpetual Monitoring vs. Periodic Audits
Executing manual searches across multiple databases requires hours of work per counterparty. For companies managing hundreds of active raw material suppliers and contractors, manual reviews create operational bottlenecks. Consequently, leading pharmaceutical firms are transitioning from periodic re-verifications (conducted every 1–3 years) toward Perpetual KYC (pKYC) models.
Under pKYC, automated systems monitor counterparty risk profiles via API integrations with official registers and commercial databases. The platform automatically issues alerts upon detecting sanctions additions, executive shifts, or pending litigation. Automated algorithms also screen multilingual media coverage, reducing manual effort across EAEU jurisdictions. While automated scoring flags emerging risks, the final determination remains with the compliance specialist, who evaluates the transaction context to render a professional judgment.
Decision Protocol When a UBO Cannot Be Identified
What happens if neither official registries nor OSINT investigations yield a clear answer? When beneficial ownership remains unconfirmed, decisions must follow a formalized internal protocol. Approving business relations with an unverified UBO should be escalated to a Risk Committee or the Head of Compliance, rather than left to procurement managers focused on closing deals.
Effective risk mitigation measures include:
Applying strict transaction volume limits.
Requiring additional performance guarantees from fully transparent supply chain participants.
Mandatory quarterly dossier re-audits.
Actionable Steps for Compliance Teams
Build Multi-Layered Counterparty Profiles: Move beyond standard EGRUL extracts. Reconstruct corporate structures using pledge registers, commercial court archives (Kad.arbitr.ru), and bankruptcy filings.
Apply Fallback Rules Under Law No. 115-FZ: If ownership remains obscured, document that all reasonable identification measures were exhausted. Formally designate the counterparty’s executive organ (e.g., General Director) as the UBO, categorize the partner as high-risk, and enforce quarterly reviews.
Cross-Check API Suppliers via EAPO: For raw material suppliers, request the relevant Eurasian patent numbers and verify listed rights holders against the Eurasian Pharmaceutical Register before signing supply agreements.
Maintain an Audit Trail: Archive every registry query, official response, and compliance memo. This record serves as primary evidence of «due diligence» during Federal Tax Service audits under Article 54.1 of the Tax Code.
Enforce Transaction Caps on Non-Transparent Partners: Until beneficial ownership is fully corroborated, limit order volumes and require secondary guarantees from transparent supply chain participants.
Counterparty verification has evolved beyond pulling a single corporate extract. Modern pharmaceutical compliance requires synthesizing data from patent registries, judicial archives, and direct counterparty disclosures. Companies that formalize these multi-sourced workflows protect themselves against tax penalties under Article 54.1 of the Tax Code while safeguarding operations against the reputational and legal risks associated with hidden beneficial owners.
Regulatory Framework & Legal References:
1. Eurasian Patent Office Order: Rules Governing the Operation and Maintenance of the Eurasian Pharmaceutical Register.
2. Government Resolution No. 729 (June 6, 2019): On Cases Permitting Restriction of Information Contained in the Unified State Register of Legal Entities.
3. Federal Law No. 115-FZ (August 7, 2001): On Combating Legalization (Laundering) of Income Obtained by Criminal Means and the Financing of Terrorism.
4. Article 54.1, Tax Code of the Russian Federation: Limits on the Exercise of Rights by Taxpayers in Tax Computation.
5. Federal Tax Service Letter No. ED-5-9/547@ (March 23, 2017): On Identifying Circumstances of Unjustified Tax Benefit.
6. Federal Tax Service Letter No. BV-4-7/3060@ (March 10, 2021): Guidance on Applying Article 54.1 of the Tax Code.
7. CJEU Judgment in Joined Cases C-37/20 & C-601/20 (November 22, 2022): WM and Sovim SA v Luxembourg Business Registers.
8. FATF Recommendations 24 & 25: Transparency and Beneficial Ownership of Legal Persons and Legal Arrangements (Revisions: March 2022 & February 2023).
9. FinCEN Interim Final Rule (March 26, 2025): Corporate Transparency Act Beneficial Ownership Information Reporting Requirements.