Australia’s anti-money laundering regulator AUSTRAC has announced it is now conducting assessments to ensure reporting entities are aware of their obligations relating to beneficial ownership of their clients.

As we previously reported, new customer due diligence obligations on reporting entities commenced on 1 June 2014 with an extension until 1 January 2016 if certain conditions were met.

Reporting entities are now required to work out who is the ultimate beneficial owner of each client and collect and verify the beneficial owner’s full name and date of birth or residential address. The information must be collected from the client, then verified using reliable and independent documentation or electronic data.

“Beneficial owner” means the natural person who ultimately owns or controls (directly or indirectly) the client. “Owns” means ownership (directly or indirectly) of 25% or more.

Undertaking due diligence on a beneficial owner can be complicated. Some common issues we have come across include:

  • You must identify a natural person (ie an individual that is the ultimate beneficial owner). This can be extremely difficult where there are multiple corporate or trust structures involved.
  • If your client is a fund (or any other trust), to determine the beneficial owner of the fund you may have to look through to the underlying investors which can be difficult if you are not the trustee of the trust.
  • If you are unable to ascertain the beneficial owner, there is a “fallback” procedure that must be followed instead. However the level of inquiry you need to undertake before you can say you have been “unable to ascertain” the beneficial owner is unclear.

AUSTRAC has already started to notify reporting entities that they will be assessed. Are you ready to be reviewed?