Determining beneficial owners

A beneficial owner is an individual who owns or controls a non-individual entity such as a company or trust. The Anti‐Money Laundering/Counter‐Terrorism Financing (AML/CTF) Rules require us to determine the beneficial owners of each non-individual customer and carry out the collection and verification of information about each beneficial owner.

For the purpose of determining beneficial ownership:

• ‘owns’ means owning 25% or more of the customer. This can be directly (such as through shareholdings) or indirectly (such as through another company’s ownership) or a combination of both direct and indirect holdings
• ‘controls’ includes control as a result of, or by means of, trusts, agreements, arrangements, understandings and practices, and includes exercising control through the capacity to determine decisions about financial and operating policies.

Beneficial ownership can be different depending on the type of entity.

The table below outlines roles that would usually be considered in the determination of beneficial owners for a trust.

Another AML concept relating to trusts is beneficiaries. Beneficiaries are individuals for whom a trust is created and who receive benefit from the trust. Beneficiaries may be specifically named or be a ‘class’ of beneficiaries such as children, grandchildren, or unitholders.

A beneficial owner of a trust is an individual who owns or controls the trust, for example the trustee or an individual who holds the power to appoint or remove the trustees of the trust.

How do I determine beneficial owners for a company?

The table below outlines roles that would usually be considered in the determination of beneficial owners for a company. 

A beneficial owner is always a person. Therefore, if a shareholder of a company is another company, the ownership structure of that company needs to be analysed to determine the ultimate beneficial owner.

We’ve included an example below. When establishing the beneficial owner of GMJ Pty Ltd, it’s important to drill down through the ownership structure to the natural persons. In this example Jack Randle and Jill Ho are ultimate beneficial owners traced through each layer of this ownership structure.

In Australia, all companies must keep a record of all shares issued on the ‘share register’ and register this information with ASIC. The register must contain information about the company’s shareholders and whether the shares are held beneficially or non-beneficially.

Beneficially held means that the owner of the shares will receive any benefits from the shares (e.g. dividends). When shares are held non-beneficially, they are held by a person as trustee or nominee, or on account of another person.  

If shares are held non-beneficially, we require confirmation directly sought from the customer as to who the shares are ultimately being held on behalf of. Once confirmed, the beneficial owners should be determined via a verification document (e.g. a trust deed) and the beneficial owners must then be verified via an appropriate verification document for an individual (e.g. an original or certified copy of a passport or driver licence).

If the shares are being held on behalf of a trust, such as in the example below, the following steps should be followed.

Step 1 – Ask the customer who Lory Smith is holding the shares on behalf of (i.e. the ultimate beneficial owner). The client confirms Lory Smith is holding the shares on behalf of Smith Family Trust as a trustee.

Step 2 – Obtain a certified copy of verification document permitted for the entity (e.g. a certified copy of trust deed for trusts) to determine the ultimate beneficial owner.

Step 3 – We must verify the ultimate beneficial owner via individual BO collection/verification process (i.e. collect and verify the full name and date of birth OR residential address).

In this scenario, the following are ultimate beneficial owners:

• Samuel Smith is ultimate beneficial owner of Lory Pty Ltd given ultimately owns 70% of its issued shares
• Lory Smith and Christopher Smith are both ultimate beneficial owners Lory Pty Ltd given their role as trustee and appointor respectively over Smith Family Trust. This makes them indirect owners of 30% of Lory Ptd’s issued shares.