Identify the individuals behind the customer
A beneficial owner is an individual who ultimately owns 25% or more of a person other than an individual, or controls that person.
Ownership can be direct or indirect. Control can qualify an individual without that ownership percentage. UBO means ultimate beneficial owner.
The Australian Act uses the term beneficial owner. An immediate corporate shareholder is not necessarily the individual the business needs to identify.
Sources: Federal Register of Legislation: Section 5 definition of beneficial owner; section 28(2)(d); Federal Register of Legislation: Sections 6-7 and 6-8; HM Revenue & Customs: What to establish, use of ultimate beneficial owner (UBO); Federal Register of Legislation: Section 5 beneficial owner definition.
- Customer company
The entity receiving the service.
- Intermediate company
A registry search may identify another company as legal owner.
- Ultimate individuals
Trace relevant ownership and assess control separately, subject to applicable Rules.
Look beyond the first company name
Invented example. An ownership chain. Lines indicate the enquiry, not ownership percentages. The first company identified need not be the ultimate beneficial owner.
Connected concepts. Lines do not show ownership or a reporting hierarchy.
Apply the precise modified measures
Rules 6-7 contains measures for qualifying listed public companies, government bodies and customers they control. Each measure has conditions that the business must establish.
Part ownership without control has a narrower measure in section 6-7(1C). It concerns an individual whose beneficial ownership arises solely through that qualifying ownership.
For bodies corporate, partnerships and unincorporated associations, section 6-8 distinguishes failed identification from an established absence of beneficial owners.
The failed-identification measure requires all reasonable steps, a record of steps and difficulties, and chief executive officer identity information. Risk-appropriate verification requires reliable and independent data.
If the business establishes on reasonable grounds that no beneficial owner exists, the chief executive officer’s identity becomes an additional CDD matter. An unanswered request does not establish that absence.
Sources: Federal Register of Legislation: Section 5 definition of beneficial owner; section 28(2)(d); Federal Register of Legislation: Sections 6-7 and 6-8.
Trace the route and explain the result
For a simple ownership chain, record the entities between the customer and the individual. Keep evidence for each link.
If one individual has several ownership routes, examine the combined position without counting an interest twice. Examine control separately.
Voting rights, board powers and practical influence can affect control. The ownership-and-control article explains the separate tests.
Sources: Federal Register of Legislation: Section 5 definition of beneficial owner; section 11 control; section 28(2)(d); Federal Register of Legislation: Sections 6-7 and 6-8.
Invented example: the individual’s indirect 30% interest
In this invented example, the individual owns 60% of the holding company. The holding company owns 50% of the customer company. Assume ordinary proportional ownership and no other rights.
The individual’s indirect interest through this route is 60% multiplied by 50%, or 30%. That exceeds the 25% ownership threshold for these stated facts.
The calculation does not show that the individual is the only beneficial owner. Other ownership routes and control can identify additional individuals.
Sources: Federal Register of Legislation: Section 5 definition of beneficial owner; section 28(2)(d); Federal Register of Legislation: Sections 6-7 and 6-8; Federal Register of Legislation: Section 5 definition of beneficial owner; section 11 control; section 28(2)(d).
- Customer company
Start with the customer whose beneficial owners must be established.
- Intermediate company
An entity in the chain is not automatically the final answer.
- Individual people
Assess who ultimately owns or controls the customer, subject to the applicable Rules and exceptions.
Look through an intermediate company
Read this visual with the source conditions and explanation in this section.
Follow the process from top to bottom.
- The individual owns 60%
The individual owns 60% of the holding company in this fictional example.
- The holding company owns 50%
The holding company owns 50% of the customer company.
- 60% × 50% = 30%
The individual has a 30% indirect interest through this single, proportional route.
- Examine other routes
Other owners, rights and control may still identify further individuals.
A simple indirect ownership calculation
Invented example. Arithmetic with ordinary proportional ownership. It is not a complete ownership or control assessment.
Follow the process from top to bottom.
Keep the conclusion separate from the chart
An ownership chart organises evidence. It can still omit a control arrangement. The conclusion needs to explain both ownership and control.
Record why each named individual qualifies. If a modified measure applies, identify its provision and the facts that meet its conditions.
Identification of a chief executive under section 6-8 does not make that individual a beneficial owner. Keep the two reasons for identification separate.
Sources: Federal Register of Legislation: Section 5 definition of beneficial owner; section 28(2)(d); Federal Register of Legislation: Sections 6-7 and 6-8.
Record uncertainty
A useful record identifies the individual, ownership route or control basis, source evidence and unresolved questions. Date the evidence.
If sources conflict, describe the difference and assign an action to resolve it. Do not invent an owner to complete a field.
Sources: Federal Register of Legislation: Section 5 definition of beneficial owner; section 11 control; section 28(2)(d); Federal Register of Legislation: Sections 6-7 and 6-8.