Beneficial Owner Checks for Companies and Trusts

A beneficial owner is the individual who ultimately owns or controls your company or trust client. Trace each ownership chain to people, assess control separately and record why each person qualifies before completing the required client checks.

Who Counts as a Beneficial Owner

A beneficial owner ultimately owns at least 25% of the customer through direct or indirect ownership, or controls the customer. Ultimate beneficial owner means the same person at the end of the chain. An intermediate company is a step in that chain.

The definition is in section 5 of the AML/CTF Act. Anti-money laundering and counter-terrorism financing (AML/CTF) checks concern both ownership and control. Someone can control a client without owning any shares.

A shareholder is the registered holder of shares. A nominee shareholder holds them for someone else. Ask who receives the economic benefit and who directs the nominee’s votes. Follow that person’s ownership and control, rather than stopping at the registered holder.

A trust beneficiary can receive trust income or capital. Being a potential discretionary beneficiary does not automatically make someone a beneficial owner. A fixed entitlement meeting the ownership threshold or powers that control the trust can do so.

For accountants, the obligation depends on providing a designated service. Use AUSTRAC’s professional designated-service guidance to establish the service and applicable commencement boundary. For the surrounding checks, use the due diligence for accountants.

Beneficial Owners of a Company

Start with the company’s registered shareholders, then trace the ownership of each shareholder that is another entity.

1. Obtain the ASIC company extract and reconcile it with the company’s share register. Record the shares held, their classes and any indication they are held for another person.
2. Obtain equivalent records for corporate shareholders. Continue through each layer to individuals, including nominee arrangements and trusts.
3. Calculate each individual’s ultimate ownership. For ordinary equivalent shares, multiply percentages along a chain and combine separate paths to the same person.
4. Check control independently. Read the constitution and shareholder agreements, then ask who actually directs financial and operating decisions.

For example, owning half of a holding company that owns three-fifths of the client gives an individual 30% indirect ownership. Different share rights require a closer assessment.

Under AUSTRAC’s control guidance, company control includes more than half the voting power or relevant issued share capital. It also includes controlling board composition or determining financial and operating policy decisions through practical influence. An outside person whose instructions the board follows can qualify.

Example: Two Family Trusts

In this fictional example, a trading company has 100 ordinary shares. Corporate Trustee A holds 50 for Family Trust A, with the other 50 held by Corporate Trustee B for Family Trust B.

Controller A is the sole shareholder and director of Corporate Trustee A and the appointor of Family Trust A. Controller B has the equivalent roles for the other trust. Neither discretionary trust gives its beneficiaries fixed ownership entitlements.

The trading company’s agreement gives Controller A the power to appoint a majority of its board. Controller B directs financial and operating policy decisions, and the board consistently follows those directions. Both individuals are beneficial owners of the trading company through control.

Record the board-appointment agreement and evidence of the board’s established behaviour. The two trusts’ equal shareholdings alone do not establish a 50% personal entitlement for either controller or any beneficiary. Assess each trust’s own controllers as well.

If no individual reaches 25%, continue the control assessment. A senior managing official can qualify through actual control, but a job title alone does not settle it.

If reasonable enquiries establish that the company has no beneficial owners, identify its chief executive officer or equivalent. If all reasonable steps fail to establish beneficial-owner identities, record the difficulties and apply the verified CEO fallback in Rule 6-8. A refusal to explain ownership needs escalation, not automatic acceptance through that fallback.

Beneficial Owners of a Trust

Identify the trust’s trustees and the individuals who own or control it, using the deed and its later changes.

Read the deed’s schedule for named roles and its operative clauses for their powers. Check every variation and later trustee appointment or removal. The trust deed checklist helps you establish which documents govern the trust today.

Under AUSTRAC’s trust guidance, collect the identity of the settlor, appointor, guardian and protector. A deed might call the appointor the principal. Assess the powers behind the label.

Individual trustees and controlling appointors require attention. A settlor who retains control can be a beneficial owner. Record beneficiaries with fixed entitlements of 25% or more and any beneficiary with control, including a beneficiary directing a bare trustee.

For a discretionary trust, identify named beneficiaries. Record classes where the nature of the trust makes individual identification impossible, such as future descendants. Discretionary status alone does not permit replacing identifiable beneficiaries with a class description.

For a corporate trustee, obtain its extract and trace its shareholders to individuals. Examine directors’ decision-making powers and anyone controlling appointments. Record which individuals control the trustee and therefore the trust. A beneficiary record and a beneficial-owner record answer different questions, even when the same individual appears in both.

Beneficial Ownership Verification

Establish each beneficial owner’s identity and support the ownership or control finding with evidence appropriate to the client’s risk.

Collect the person’s full name, other names, date of birth and residential address. Establish whether the person is a politically exposed person (PEP), and complete the required targeted financial sanctions checks. A client’s declaration is a starting point for screening.

Separate evidence of the person’s identity from evidence of their role. Extracts, share registers and deeds explain ownership or authority. Identity documents and reliable electronic checks establish who the individual is.

AUSTRAC’s individual verification guidance includes passports and driver licences, or suitable non-photographic documents with secondary evidence. Record which personal details the evidence verifies. Electronic verification must use reliable independent data and address whether the person is who they claim to be.

A low-risk finding can permit simplified measures under your AML/CTF policies. Rule 6-17 permits certain matters, including beneficial-owner identity, to be established without separate verification when its conditions hold. Collect appropriate information, establish low risk and record why you have no grounds to doubt it. Enhanced due diligence must not apply.

For higher risk, obtain further independent evidence and resolve conflicting records. Apply the enhanced measures required by the risk and your policies, including source-of-funds or source-of-wealth enquiries where required. Low risk changes the permitted method, not the need to understand who controls the client.

Structures That Need a Closer Look

Investigate layered companies, overseas shareholders, nominee arrangements and foreign appointors when they obscure who owns or controls the client.

These arrangements can have legitimate purposes. Ask the client to explain each entity’s function and why the arrangement is needed. Request the relevant registers and nominee agreements. Obtain the documents granting control as well. Compare the explanation with who receives funds and makes decisions.

If a register names a shareholder but the client says another person directs it, obtain the arrangement between them. If a foreign appointor can replace the trustee, establish that person’s identity and powers. Resolve the inconsistency before treating the initial form as complete.

Pause the designated service when you cannot establish the required matters and no lawful exception permits proceeding. Escalate unexplained concealment or refusal under your AML/CTF policies, including the assessment of suspicious matter reporting obligations. Keep that assessment confidential.

Recording Beneficial Owners at Onboarding

Keep one record for each individual and connect it to the group structure chart. The chart shows the chain. The individual record explains why that person qualifies.

Your record must be usable by another staff member. Include the following fields in the form and review record.

• Full name, other names, date of birth and residential address.
• Every relevant client entity and the person’s role in it.
• Direct or indirect ownership percentage, share rights and the calculation, where ownership applies.
• Control powers and the document or established behaviour supporting them.
• Identity evidence, the details checked and any permitted simplified-measure reasoning.
• PEP and sanctions results, risk reasoning and unresolved discrepancies.
• Staff reviewer, decision, review date and references to the supporting documents.

Allow one person to have several roles. A trustee, shareholder and appointor who is the same individual needs one identity record with each role recorded. Collect supporting documents securely and request a corrected answer when the form and deed disagree.

Update the record after changes to shareholders, trustees, appointors or control rights. Recheck it when new evidence conflicts with the file and at the reviews set by your policies. Preserve the earlier version so staff can explain the change.

Before completing onboarding, reconcile every ownership chain and control finding with the chart. Each identified individual must have an identity outcome and a recorded reason for inclusion. Any remaining uncertainty must have an assigned follow-up and a decision about whether the designated service can begin.