One of the most challenging aspects of AML compliance is identifying and verifying beneficial owners. This guide provides practical steps for meeting your beneficial ownership obligations.

What is Beneficial Ownership?

A beneficial owner is the natural person who ultimately owns or controls a customer entity, or on whose behalf a transaction is conducted. This goes beyond the registered or legal owner to identify the real people behind corporate structures.

Under AML/CTF requirements, you must identify any individual who:

  • Owns or controls more than 25% of the entity (directly or indirectly)
  • Otherwise exercises control over the entity

Why It Matters

Complex corporate structures can be used to:

  • Hide the true source of funds
  • Obscure criminal ownership
  • Evade sanctions
  • Facilitate tax evasion

By identifying beneficial owners, you help prevent these abuses and protect your business from being used for financial crime.

Step-by-Step Verification Process

Step 1: Understand the Entity Structure

Start by obtaining:

  • Certificate of incorporation or registration
  • Current company extract from ASIC
  • Trust deed (for trusts)
  • Partnership agreement (for partnerships)
  • Constitution or articles of association

Step 2: Identify the Ownership Chain

Map out the ownership structure:

  • Who are the shareholders/unitholders?
  • What percentage does each hold?
  • Are any shareholders themselves entities?
  • Continue tracing until you reach natural persons

Step 3: Identify Control Persons

Beyond ownership, identify anyone who:

  • Controls the composition of the board
  • Can cast or control voting of shares
  • Has the capacity to determine decisions
  • Has power through agreements or arrangements

Step 4: Verify Identities

Once identified, verify beneficial owners by:

  • Collecting government-issued photo ID
  • Verifying the document is authentic
  • Matching the person to the document

Step 5: Document Everything

Maintain records of:

  • Ownership structure documentation
  • Beneficial ownership analysis
  • Identity verification documents
  • Any difficulties encountered and steps taken

Common Structures and Their Challenges

Companies

  • Trace shareholdings through corporate layers
  • Watch for nominee shareholders
  • Consider shareholder agreements that grant control

Trusts

  • Identify trustees (who control the trust)
  • Identify beneficiaries (who benefit)
  • Consider appointors and protectors (who control trustees)
  • Understand discretionary vs. fixed trusts

Foreign Entities

  • May require foreign corporate registry searches
  • Consider using commercial verification services
  • Apply enhanced due diligence

Using Technology

Modern compliance technology can help by:

  • Automating corporate registry searches
  • Creating visual ownership structure diagrams
  • Tracking changes in ownership over time
  • Flagging missing or incomplete information

AML Shield’s platform includes beneficial ownership tools designed specifically for Australian businesses and common entity types.

Red Flags

Watch for warning signs that beneficial ownership may be obscured:

  • Complex structures without clear business purpose
  • Multiple layers of holding companies
  • Bearer shares or nominee arrangements
  • Reluctance to provide information
  • Inconsistencies in documentation
  • Unusual jurisdictions in the ownership chain

Next Steps

  1. Review your current beneficial ownership procedures
  2. Identify gaps in your processes
  3. Train staff on verification requirements
  4. Consider technology solutions to streamline compliance

Need help implementing beneficial ownership verification? Contact AML Shield for expert guidance and tools designed for Tranche 2 compliance.