If you raise under Regulation S, you are selling only to non-US persons - and that test does not stop at the investor on the form. When an entity invests, you need to look through it to its beneficial owners and confirm a US person is not hiding behind an offshore shell. Surface checks miss this, and getting it wrong can break your Reg S exemption. This guide explains why look-through matters and how to do it properly.

Why the surface check isn't enough

Reg S turns on who the investor really is. An entity formed offshore can still be owned or controlled by a US person, and selling to it could be treated as selling to that US person - exactly what Reg S forbids.

Checking only the entity's place of formation is therefore not enough. A Cayman company with a US beneficial owner is a US-person risk, and the exemption cares about substance, not the certificate of incorporation.

What beneficial-owner look-through means

Look-through means identifying the real people who own or control an investing entity - the beneficial owners - and testing each against the US-person definition, not just the entity itself.

This is KYB (know-your-business) layered onto KYC: map the ownership structure, reach the natural persons behind it, and confirm their status. The deeper or more opaque the structure, the more scrutiny it deserves.

How to run the screening

Start by obtaining the entity's ownership structure and identifying owners above a sensible threshold. Verify each individual's identity and residency, and test them against the US-person definition and your sanctions screening.

Where the structure is layered - entities owning entities - keep tracing until you reach real people. Do not accept a self-declaration of non-US status for a complex entity without evidence behind it. Document the whole chain you relied on.

Handling red flags and records

Treat certain signals as reasons to dig deeper: opaque ownership, a refusal to disclose owners, US addresses or phone numbers on an "offshore" entity, or structures that seem built to obscure. Any of these warrants more diligence or declining the investor.

Keep the evidence. If your Reg S status is ever questioned, the look-through records are what show you took reasonable steps. Investors see the matching rules in Reg S from the investor's side.

Where to go next

• Next: Reg S - offering tokens to non-US investors.
• The investor's view: Reg S from the investor's side.
• Glossary: US person.

Sources: U.S. SEC (sec.gov); FinCEN (fincen.gov), as of 2026.