Customer due diligence for a company or trust is not finished until you reach real people. Beneficial ownership identification is where professional practices earn their keep, and where most CDD files fall short. This guide works through the ownership threshold, the control tests and the layered structures that hide behind them.
The two ways someone is a beneficial owner
Both tests matter. A person with no shares at all can be a beneficial owner: a trustee making decisions for a trust, an appointor who can hire and fire the trustee, a director with casting control, or anyone whose instructions the company habitually follows.
- Ownership: holding 25% or more of the client, directly or indirectly through layers of entities
- Control: controlling the client through other means, regardless of any shareholding
Walking layered structures
When an entity owns an entity, ownership multiplies down the chain. If Holding Co owns 60% of Op Co and Person A owns 50% of Holding Co, Person A's effective interest in Op Co is 30%: over the threshold. The discipline is to keep walking until every chain ends at humans, recording each link: who owns what percentage of whom, from which source (ASIC extract, trust deed, register).
- Map the full structure on one page before calculating anything
- Compute effective percentages along each chain, then aggregate per individual
- Record the source for every holding: document type, number and date
- Watch circular holdings: structures that reference themselves need manual judgment, flagged for review
Trusts: where control lives
- Trustees and representatives: collect and verify the information required for the customer type, including relevant individuals behind a corporate trustee, subject to any applicable simplified or deemed-verification rule
- Appointor / guardian: can remove the trustee, often the most powerful role in the deed
- Settlor: established the trust: identify, noting their ongoing influence varies
- Beneficiaries and persons on whose behalf the service is received: identify each beneficiary or, where the trust's nature makes individual identification impossible, describe each beneficiary class
When nobody reaches 25%
First test control after working through ownership. If no beneficial owner exists, or none can be established after the required steps, apply Rules 6 to 8 by establishing the CEO or equivalent. Do not label that fallback person a beneficial owner unless the ownership-or-control definition is independently satisfied. Record the searches, evidence and reasoning rather than leaving a blank field.
What good UBO evidence looks like
Cassandra AML's ownership register and calculator do the arithmetic transparently (every result labelled as calculated from recorded holdings, never as a legal determination) so the file shows its working the way an examiner expects.
- The structure map with percentages and control roles, dated and sourced
- Verification of each identified individual: identity checked, screened for sanctions and PEPs
- The calculation trail for indirect ownership, not just the conclusion
- A refresh trigger: ownership changes, controller changes, and risk-based review dates
- Seven-year retention of everything above
Official sources
Confirm the current rules against these primary sources.
Questions
Is 25% measured per chain or in total?
Both. An individual over 25% on any single chain is in, and aggregated effective ownership across multiple chains counts too. Calculate along each chain, then sum per person.
Do we have to identify beneficiaries of a discretionary trust?
For a trust customer, establish the persons on whose behalf the service is received by identifying each beneficiary or, where the trust's nature makes individual identification impossible, describing each beneficiary class. Separately identify trustees, representatives and beneficial owners or controllers under the applicable customer-type rules.
What if the client will not disclose their structure?
You cannot complete customer due diligence and must not provide the designated service. Ownership disclosure is not negotiable under the regime.
How often should UBO records be refreshed?
Set risk-based periodic-review frequencies in the AML/CTF program and review following ownership or controller changes, material events, unusual activity or doubts about KYC information. AUSTRAC does not prescribe one universal high-, medium- and low-risk calendar; record why the selected frequency is proportionate.
General information for Australian professionals, not legal advice. It does not replace the AML/CTF Act, the Rules or AUSTRAC guidance. See our editorial standards.
Keep reading
- CDD explained4 min
Customer due diligence under the amended AML/CTF Act: verifying individuals and entities, finding beneficial owners (UBOs), PEP and sanctions screening, risk rating, and when enhanced due diligence applies.
- Complex ownership structures7 min
A practical Australian guide to tracing indirect ownership and control through companies, trusts, nominees and foreign entities for defensible TCSP CDD.
- Small-business KYB for BAS agents5 min
A risk-based entity due-diligence workflow for BAS practices providing designated services to companies, partnerships, trusts and sole traders.