“But the company is registered with ASIC. Why do you need to know who owns it?”
It is a reasonable question.
A business may have an Australian Company Number (ACN), a registered office, directors and shareholders. A trust may have a trustee and a formal trust deed. On paper, the structure can appear straightforward.
But under Australia's AML/CTF framework, identifying the customer is not necessarily the end of the process.
For a customer that is not an individual, reporting entities may also need to establish who ultimately owns or controls that customer.
That is where beneficial ownership comes in.
Under the AML/CTF Act, a beneficial owner is an individual who ultimately owns 25% or more, directly or indirectly, of the customer, or who directly or indirectly controls the customer.
This distinction matters because the name appearing on a company registration may not be the person who ultimately owns or controls the business.
What does “beneficial owner” actually mean?
Think of it this way.
A company has four shareholders.
Three are individuals. The fourth shareholder is another company.
Looking only at the first company's shareholder register may not tell you who ultimately owns or controls the corporate shareholder.
The ownership investigation may therefore need to continue through the second company and potentially through additional entities until the relevant individual or individuals are identified.
Ownership can be direct or indirect. Where there is a chain of companies, the assessment may need to follow that chain to identify the individual beneficial owner or owners.
So a structure such as:
Individual → Holding Company → Operating Company → Customer
may require more than checking the operating company's immediate shareholders.
The question becomes:
Who ultimately owns or controls the customer?
Ownership isn't the only issue. Control matters too.
One common misunderstanding is that beneficial ownership is simply about share percentages.
It isn't.
The AML/CTF framework also captures control.
Control can involve the ability to influence or direct another person's decision-making. It may arise through formal ownership and voting rights, but can also arise through practical influence and established patterns of behaviour.
This means someone may potentially be relevant to a beneficial ownership assessment even where they do not hold a straightforward 25% shareholding.
For businesses conducting customer due diligence, this is an important distinction.
A compliance process that simply asks:
“Who owns 25% or more?”
may not be enough on its own.
The next question may need to be:
“Who actually controls this customer?”
Why do businesses ask for company documents?
This is one reason customers may be asked for more than personal identification.
Depending on the customer and its structure, a reporting entity (real estate businesses or professional practices under AML/CTF regime) may need information that helps establish the ownership and control chain.
This could include corporate records, ownership information and, for trusts, relevant trust documentation.
Documents that may help establish a trust’s ownership and control structure include:
· the trust deed
· documents from professional service providers
· trustee resolutions
· a memorandum of trust.
For a corporate structure, additional company searches or ownership information may be necessary to understand how one entity connects to another.
For example, a property buyer may purchase through a company that is owned by another company or a family investment structure. Checking the purchasing company’s registration alone may not reveal the individuals who ultimately own or control it. The business may need to examine the ownership chain and obtain supporting documentation to establish beneficial ownership.
That is why a request for additional documentation does not necessarily mean the business believes something is wrong.
It can simply mean the reporting entity has not yet established the ownership and control position to the standard required by its AML/CTF obligations.
What about trusts?
Trusts can make beneficial ownership more complicated because there may be several people with different roles.
The relevant individuals can depend on the structure and circumstances of the trust.
Customer due diligence for trusts involves establishing relevant information about the trust's ownership and control structure.
Depending on the trust and the applicable requirements, relevant roles may include:
· trustees or directors of a corporate trustee
· the appointor or principal
· fixed beneficiaries with more than 25% entitlement.
The important point is that a trust should not automatically be treated like a simple company with shareholders.
Its legal and control structure needs to be understood on its own terms.
What happens when the ownership structure is complicated?
Complexity does not automatically mean criminal activity.
A group structure might exist for entirely legitimate commercial, investment, tax, asset protection or operational reasons.
However, complexity can make it more difficult to establish who ultimately owns or controls an entity.
That is precisely why beneficial ownership transparency is an important part of the global AML framework.
The Financial Action Task Force (FATF) says that criminals can misuse companies and other legal structures to conceal their identities, the purpose of transactions and the source or use of funds. Its beneficial ownership standards are designed to improve the availability of adequate, accurate and up-to-date information about the individuals who ultimately own or control legal persons and arrangements.
The objective isn't to assume that every complex structure is suspicious.
It is to make it harder for legitimate corporate structures to become a barrier to understanding who is actually behind them.
Beneficial ownership is part of Customer Due Diligence
Under Australia's reformed AML/CTF framework, beneficial ownership sits within the broader Customer Due Diligence (CDD) process.
Before commencing a designated service, a reporting entity generally needs to establish, on reasonable grounds, matters including:
· who the customer is
· who is receiving the service on the customer's behalf, where relevant
· who is acting for the customer and their authority to do so
· the identity of beneficial owners where the customer is not an individual
· relevant PEP and targeted financial sanctions information
· the nature and purpose of the business relationship or occasional transaction.
The information collected must also be appropriate to the customer's ML/TF risk, and relevant information needs to be verified using reliable and independent data.
So beneficial ownership isn't an isolated compliance form.
It is one component of a broader process designed to establish who the customer is, who is behind the customer and what risks are associated with the relationship.
And the process doesn't necessarily end at onboarding
Another important point is that beneficial ownership information can change.
A company may acquire a new shareholder.
A shareholder may transfer its interest.
A new holding company may be introduced.
A trust may change its trustee or other relevant arrangements.
The customer may also change the way it operates or the jurisdictions with which it deals.
Ongoing customer due diligence for business relationships includes reviewing and, where appropriate, updating customer risk assessments and KYC information. Changes to a customer's corporate structure or beneficial owners can be triggers for review.
This means a beneficial ownership check should not necessarily be viewed as:
“We collected the documents once, so we're finished.”
The information needs to remain sufficiently current for the reporting entity to manage the customer's risk appropriately.
What if you cannot identify a beneficial owner?
This is an area where businesses should avoid simply guessing.
The AML/CTF Rules contain provisions dealing with circumstances where a reporting entity has taken all reasonable steps but cannot establish the identity of a beneficial owner.
For certain customers, the Rules provide a mechanism involving documented reasonable steps and, where applicable, identifying and verifying the relevant senior executive or equivalent.
The important principle is:
Don't invent an owner simply to complete the form.
The ownership investigation, the information available, the steps taken and any difficulties encountered need to be handled in accordance with the applicable requirements.
Why might you be asked for the same information again?
From a customer's perspective, AML/CTF checks can sometimes feel repetitive.
You may already have provided:
· a driver's licence
· a passport
· proof of address
· an ASIC extract
· shareholder information
· a trust deed
· company structure documents
· information about directors
· information about beneficial owners.
Then another professional asks for similar information.
Why?
Because different reporting entities have their own customer relationships and AML/CTF obligations.
A previous KYC check does not automatically mean that another reporting entity has established the matters it is required to establish for its own customer relationship.
For a buyers’ agent, the practical question is not whether a bank or another professional has already checked the customer. It is whether the agent has met the due diligence requirements that apply to the agent’s own designated services. Any permitted reliance arrangements need to satisfy the applicable rules; checks performed elsewhere do not automatically remove the agent’s responsibilities.
There may also be differences in the service being provided, the customer's risk profile, the date of the information, or the structure being assessed.
KYC information should be collected and verified in a way that is appropriate to the customer’s ML/TF risk. Higher-risk circumstances can require additional information.
Beneficial ownership and higher-risk customers
Beneficial ownership can become particularly important when a customer has a complex or opaque structure.
Circumstances such as shell companies or complex trust and corporate structures that obscure beneficial ownership may warrant closer consideration of source of wealth and source of funds when managing higher ML/TF risk.
Other risk factors can also matter.
For example, Enhanced due diligence may also be relevant for certain politically exposed persons and customers connected with jurisdictions subject to FATF calls for enhanced due diligence.
Again, these circumstances don't automatically mean a customer has done anything wrong.
They mean the reporting entity may need to apply additional measures because of the risk presented.
What this means for Australian businesses
For businesses now operating within Australia's expanded AML/CTF regime, beneficial ownership should be treated as an operational process rather than simply another field on an onboarding form.
A practical process should consider:
1. Who is the actual customer?
Identify the legal person or arrangement receiving the designated service.
2. Who owns it?
Look at both direct and indirect ownership.
3. Who controls it?
Consider voting rights, formal arrangements and other forms of control.
4. Is there another entity in the chain?
If a company owns the customer, determine who ultimately owns or controls that company where required.
5. Is the customer a Trust?
Understand the trust's relevant roles, structure and control arrangements.
6. Can the information be independently verified?
Verify KYC information using reliable and independent data, with the extent of verification appropriate to the customer’s risk.
7. Has anything changed?
Ownership and control information should be reviewed and updated when appropriate, including when relevant changes occur.
The bigger picture
Beneficial ownership can sometimes feel like administrative paperwork.
But the reason for the process is much broader.
A company is a legal structure.
A trust is a legal arrangement.
Neither tells you, by itself, the complete story of the individual people behind the structure.
AML/CTF customer due diligence is designed to look beyond the surface where necessary and establish who ultimately owns or controls the customer.
This is consistent with the wider international approach. FATF's Recommendations 24 and 25 focus on transparency of beneficial ownership for legal persons and legal arrangements, with the objective of preventing corporate and legal structures from being misused for money laundering and terrorist financing.
For Australian businesses subject to the AML/CTF regime, that means beneficial ownership isn't simply about collecting another ID document.
It is about being able to answer a much more fundamental question:
Who is really behind the customer?
And importantly, the answer needs to be supported by reasonable, reliable information rather than assumptions.
What should businesses do now?
If your business is covered by Australia's AML/CTF regime, consider reviewing your beneficial ownership process.
Ask yourself:
Can we identify direct and indirect ownership?
Can we identify control, not just shareholders?
Can we deal with trusts and layered structures appropriately?
Do we know what documents and information we need to verify ownership?
Do our procedures explain what happens when ownership cannot be established?
Do we have a process for identifying changes to ownership and control?
Can we demonstrate how our decisions were reached?
These are practical questions that can help turn beneficial ownership from a paperwork exercise into a functioning part of your AML/CTF framework.
AML SoftServe
For newly regulated Australian businesses, AML/CTF compliance can involve customer identification, beneficial ownership, risk assessment, ongoing monitoring, record keeping and other obligations.
AML SoftServe provides AML/CTF software and Compliance Officer Support Services designed to help Australian real estate agents, buyers' agents and accounting practices manage these processes without needing to build an in-house compliance team.