AUSTRAC Beneficial Ownership Factsheet – Devil in the Detail

AUSTRAC recently produced a factsheet entitled “Meeting your Beneficial Ownership Obligations”. It is informative. Well worth reading for all Australian reporting entities, especially the vast majority of reporting entities who struggle with the whole concept of beneficial ownership. It is daunting.

The Factsheet covers 5 topics:

  1. Assess the ML/TF risk posed by the beneficial owners of your customers
  2. Determine the identity of the beneficial owners of your non-individual customers
  3. Collect, and take reasonable measures to verify, each beneficial owner’s identification information
  4. Keep records of the beneficial owner identification process that you undertake
  5. Document how you will fulfil your obligations in your AML/CTF Program

It is the 5th point (Documenting) that may cause you more headaches than you initially think. How difficult can it be to document what your organisation does with regard to beneficial ownership? Unfortunately, it can be very difficult and complex to meet all the obligations around beneficial ownership contained in the AML/CTF Rules.

The Factsheet states that your AML/CTF Program should describe:

  • how you will determine who the benecial owner(s) of your non-individual customers are;
  • what information you will collect about each beneficial owner;
  • what information you will verify (taking reasonable measures) about each beneficial owner;
  • what reliable and independent documentation, or reliable and independent electronic data, you will use to verify the identity documentation of beneficial owners;
  • if, and when, you will allow the use of disclosure certificates;
  • if, and when, you will resort to identifying an individual instead of being able to identify an actual beneficial owner;
  • how your business defines ‘reasonable measures’ for verifying;
  • about beneficial owners (or other individuals where an actual beneficial owner cannot be identified).

Note the use of the word “should”. AUSTRAC have not used the word “must” but it can be assumed that they might define “should” as more like “must”.

Now for the sting in the tail, particularly for those reporting entities who have purchased generic AML/CTF Programs from consultants or law firms. If you have not taken the time and effort to tailor your AML/CTF Program you are at risk of breaching your obligations around beneficial ownership (and, potentially, many others). The terminology used in these generic AML/CTF Program does not make your business compliant with the Act or the Rules unless you have tailored it to your unique business circumstances and ML/TF risks. In many of these types of AML/CTF Program large sections are either taken directly from, or are paraphrases, of sections of the Act or Rules.Yes, the providers will have stated in the fine print that you need to tailor the program accordingly but did you realise that?

Bear in mind what the Factsheet states:

“Processes set out in your AML/CTF program must not be generic — they must be specific to your business and show your staff what to do when they need to determine, collect and/or verify beneficial owner information. Processes copied from the AML/CTF Rules or the AUSTRAC compliance guide are not specific to your business, and should not be used instead of tailored procedures.”

What next? Find your AML/CTF Program and your ML/TF Risk Assessment and read them carefully. Do they deal with beneficial ownership to the standard required? If not, then get to work.

The Factsheets can be download from here.

Require assistance with beneficial ownership obligations or any other AML/CTF issues please get in touch.

Paddy Oliver leads the team at AML Experts. Paddy has extensive experience as a lawyer and compliance management consultant. Importantly for you, he is an experienced Independent Reviewer and Auditor. That means AML Experts is your one-stop-shop for AML Act and AUSTRAC compliance. Paddy can be contacted here.

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