The transparency register requires legal entities not only to identify their beneficial owners but, in certain cases, also to provide information on the entire chain of control. One trigger is a freezing measure imposed on a beneficial owner under the Embargo Act or the Foreign Illicit Assets Act. Whether such a case exists can only be established through a sanctions check. This article explains the legal basis, the practical consequences of a match and how Konsento integrates this verification step as standard into the share register and the reporting process.
From 1 October 2026, unlisted Swiss companies limited by shares and other legal entities covered by the legislation must identify their beneficial owners and report them to the transparency register (Art. 2 and Art. 9 LETA). In many cases, it is sufficient to identify the natural person who directly or indirectly controls the company (Art. 4 para. 1 LETA).
In certain situations, however, this is not enough. The legal entity must additionally provide information on the entire chain of control, i.e. on the natural persons, legal entities or trusts situated between it and the beneficial owner (Art. 15 para. 2 LETO). Whether this additional reporting obligation applies from the first intermediary level or only in a multi-level structure depends, among other things, on whether a measure to freeze funds or economic resources has been imposed on any of the beneficial owners (Art. 15 para. 1 let. c LETO).
In practice, this can only be reliably established if the legal entity carries out a sanctions check. This article explains why screening against sanctions and freezing lists effectively becomes a prerequisite for a correct report, what a sanctions check involves, and how Konsento integrates this verification step as standard into the management of the share register and the reporting process.
Table of Contents
- The reporting obligation for chains of control
- Why LETO effectively requires a sanctions check
- What a sanctions check covers
- What a match means for reporting the chain of control
- How Konsento integrates the sanctions check into the reporting process
- Conclusion
The reporting obligation for chains of control
As a general rule, LETA requires every covered legal entity to identify the natural person or persons who ultimately control it, whether through an ownership interest of at least 25% of the capital or voting rights or by other means (Art. 4 para. 1 LETA). If no such person can be identified, the most senior member of the governing body is deemed to be the beneficial owner on a subsidiary basis (Art. 4 para. 2 LETA). To fulfil this obligation, the legal entity must establish not only who the beneficial owner is, but also the nature and extent of the control exercised by that person (Art. 7 LETA).
In three situations, identifying the beneficial owner alone is not sufficient. The Ordinance then additionally requires information on the entire chain of control, i.e. on every natural person, legal entity or trust situated between the reporting legal entity and the beneficial owner (Art. 15 para. 1 LETO).
The three triggers for reporting the chain of control
- The chain of control includes at least two intermediate natural persons, legal entities or trusts (Art. 15 para. 1 let. a LETO).
- The chain of control includes at least one trust or fiduciary arrangement (Art. 15 para. 1 let. b LETO).
- A measure to freeze funds and economic resources under the Federal Act of 22 March 2002 on the Implementation of International Sanctions (Embargo Act, EmbA) or the Federal Act of 18 December 2015 on the Freezing and the Restitution of Illicit Assets held by Foreign Politically Exposed Persons (Foreign Illicit Assets Act, FIAA) has been imposed on at least one of the beneficial owners (Art. 15 para. 1 let. c LETO).
As soon as any one of these three conditions is met, the legal entity must obtain the required identification information for every person and every legal entity within the chain of control (Art. 15 para. 2 LETO).
Why LETO effectively requires a sanctions check
The first two triggers can readily be determined from the legal entity’s own ownership and organisational structure. A legal entity should know how many levels exist between it and the beneficial owner and whether a trust or fiduciary arrangement forms part of that structure.
The third trigger is different. Whether a freezing measure under the Embargo Act or the Foreign Illicit Assets Act has been imposed on a beneficial owner cannot be determined from the company’s structure. It is an external circumstance that can only be established by screening the person against the relevant sanctions and freezing lists (Art. 15 para. 1 let. c LETO).
The explanatory report on LETO also expressly states that, for the circumstances referred to in letters b and c, the number of levels in the chain of control is irrelevant. Information on the chain of control must be obtained whenever a trust, fiduciary arrangement or such a freezing measure exists, even if there is only one intermediary level between the legal entity and the beneficial owner.
For the legal entity, this means that it may already be required to report the entire chain of control where there is only one intermediary level if the sanctions check produces a match. Without such a match, and in the absence of a trust or fiduciary arrangement, the chain of control only has to be reported once it comprises at least two intermediary levels (Art. 15 para. 1 let. a LETO).
Without a sanctions check, a legal entity cannot reliably make this determination because it simply does not know whether the circumstance relevant under letter c exists until it has been verified. Sanctions screening is therefore not merely an additional precautionary measure. It is, in practice, a prerequisite for correctly applying Article 15 LETO.
It should also be noted that this verification obligation does not apply only to beneficial owners identified through an ownership interest or control. It also applies to persons reported on a subsidiary basis as the most senior member of the governing body where no natural person exercises control in the actual sense (Art. 4 para. 2 LETA). For these persons too, it is relevant whether a freezing measure has been imposed on them.
What a sanctions check covers
A sanctions check systematically screens the identity of a natural person or legal entity against the relevant sanctions and freezing lists. In Switzerland, this includes in particular the lists maintained by the State Secretariat for Economic Affairs (SECO) in connection with the implementation of the Embargo Act, supplemented by the specific list relating to the freezing of assets of foreign politically exposed persons under the Federal Act of 18 December 2015.
The screening is based on the person’s name, date of birth, nationality and other identifying characteristics. It must also be capable of dealing with spelling variations and similar names so that genuine matches can be identified and false positives excluded.
Because sanctions lists are continuously updated, a one-off check at a particular point in time provides only a snapshot. Recurring screening is therefore necessary in order to identify subsequent changes in a timely manner.
What a match means for reporting the chain of control
If the sanctions screening produces a match, the legal entity must obtain the prescribed information for every person, every legal entity and every trust within the chain of control.
For natural persons, this includes their name, date of birth, nationality, municipality of residence and country of residence (Art. 15 para. 2 let. a LETO in conjunction with Art. 10 LETO).
For legal entities within the chain, the corresponding identification information relating to the legal entity must be obtained (Art. 15 para. 2 let. b LETO in conjunction with Art. 11 LETO). Where persons or legal entities act in a fiduciary capacity, it must additionally be stated whether they act as principal or fiduciary (Art. 15 para. 2 let. c LETO).
If a trust forms part of the chain, information must additionally be provided on the applicable law, the trustee and other beneficial owners of the trust (Art. 15 para. 2 let. d LETO).
A legal entity that overlooks a match because it has not carried out a sanctions check therefore risks submitting an incomplete report without even being aware of it.
How Konsento integrates the sanctions check into the reporting process
Konsento supports companies in collecting and managing the data of their beneficial owners in the digital share register and in preparing and submitting their report through the Transparency Register Assistant. Following the initial report, changes to the ownership structure and to the data of reported beneficial owners can be monitored.
Konsento carries out sanctions checks as standard both when preparing a report to the transparency register and when monitoring changes. The legal entity does not have to initiate the check separately or manually compare its data against external lists.
The legal entity is not merely informed whether a potential match has been identified. It also receives a screening and results report documenting when the check was carried out, which lists were screened and what the outcome was.
This supports the final assessment of whether the identified beneficial owner is in fact subject to relevant sanctions and whether the chain of control must be reported even if it comprises only one intermediary level.
The determination required under Article 15 para. 1 let. c LETO can thus be documented and substantiated at any time, whether in the event of a dispute or during a review by the competent authority. This substantially reduces the burden on the board of directors and the persons responsible for the report.
Conclusion
In the context of the chain of control under Article 15 LETO, sanctions screening is not an optional additional step. In practice, it is a prerequisite for correctly fulfilling the reporting obligation.
Only a legal entity that knows whether a freezing measure under the Embargo Act or the Foreign Illicit Assets Act has been imposed on a beneficial owner can determine whether the chain of control must already be reported from the first intermediary level or only from the second level onwards (Art. 15 para. 1 LETO).
Companies that do not perform this screening systematically risk submitting an incomplete report without even realising it. By integrating sanctions checks into the management of ownership data and the reporting process from the outset, companies gain clarity about the scope of their reporting obligations while at the same time creating the documentation required to substantiate the report afterwards.
Ensure that your report to the transparency register remains correct, complete and legally compliant even when circumstances subsequently change. Set up your share register with Konsento and use the Reporting Assistant for your report, or prepare your report directly there. Konsento’s monitoring solution continuously checks in the background whether any of your beneficial owners becomes subject to sanctions, without any additional effort on your part.