If you are a reporting entity, regulated by AUSTRAC for AML/CTF compliance you will understand the Part B obligations of your AML/CTF program. Otherwise known as customer due diligence or Know your Customer.
Executing on this policy prescription becomes far more complex when your customer happens to be a business entity.
Many businesses, particularly companies with an international presence, have many layers of beneficial ownership. This makes identifying and verifying the ultimate beneficial owners of your business customers a very complex process, takes time and often requires requesting identity information back and forth.
In this post, we will go through the information you are required to collect and verify for AML/CTF compliance when allowing a new business customer to use your service. Explaining the first steps to performing a ‘know your business customer’ check with bronID.
Keep in mind that in many cases, verifying ultimate beneficial owners of entities is also required.
What is Beneficial Ownership?
As defined in Part B of your AML/CTF Program by AUSTRAC
A beneficial owner of a customer is defined as an individual (a natural person or persons) who ultimately owns or controls (directly or indirectly) the customer.
Ownership for the purposes of determining a beneficial owner means owning 25% or more of the customer.
The definition of ‘control’ includes whether the control is exerted by means of trusts, agreements, arrangements, understandings or practices and whether or not the individual has control based on legal or equitable rights. It includes where an individual can exercise control by making decisions about financial and operating policies.
What happens if my business customers have beneficial owners who are also businesses? If this is the case, you will need to navigate the corporate structure to identify all indirect beneficial owners too. The bronID portal is one way to fill in any gaps you may have with regards to verifying all beneficial owners of your business customers.
Refer to our post for a more in-depth understanding of what is required to Verify the Ultimate Beneficial Owners of Your Business Customers.
Australian Business Customers
- Sole Traders
- Private Companies
- Public Companies
- Regulated Trusts
- Unregulated Trusts
- Government Bodies
Business Customer Verification Examples:
KYB PTY LTD has applied to receive a designated service from a reporting entity.
To provide service to KYB PTY LTD, the reporting entity must at a minimum:
- Collect and verify the company details of KYB PTY LTD, in accordance with the customer identification procedures for a company.
- Collect and verify the beneficial owners of KYB PTY LTD, according to the customer identification procedures for individuals.
- Individual A
- Individual B
- Individual D
For more information on how to identify who the ultimate beneficial owners of a company are, particularly when there is a complex structure, see the post Verify the Ultimate Beneficial Owners of Your Business Customers.
A simplified company verification procedure can be used when verifying a Public Company to achieve your compliance obligation to the AML/CTF Rules.
To provide service to a Public Company, the reporting entity must at a minimum:
- Collect and verify certain information on the company, including the legal name.
- Identify and collect if the company is listed on a domestic or international stock exchange and therefore regulated.
Trustee Pty Ltd, has applied to receive a designated service from a reporting entity.
To provide service to Trustee Pty Ltd, the reporting entity must at a minimum:
- Collect and verify certain information from Trustee PTY LTD, as the trustee on behalf of the Family Trust, in accordance with the reporting entity’s customer identification procedures for a company under Part 4.3
- Collect the full names of all beneficiaries of the Family Trust (that is, Individual A, B and C)
- Identify and verify Individual A, as the beneficial owner of the Family Trust, in accordance with the beneficial owner customer identification procedures at 4.12.1.
- Collect and verify the full name of Individual Y, as the settlor of the trust – unless:
- the material asset contribution to the trust by Individual Y (as the settlor) at the time the trust is established is less than $10,000; or
- at the time of undertaking customer identification procedures Individual Y is deceased; or
- the trust is verified using the simplified trustee verification procedure (see paragraph 4.4.8 of the AML/CTF Rules).
Complying with your AML obligations can be a complex process, and yet a crucial piece for proving a legitimate service.
bronID is constantly adding to our AML/CTF toolkit to help you execute on your each of your compliance obligations.
By following our knowledge centre guides we aim to help you automated your AML/CTF compliance obligations and make achieving industry best practices the bronID standard.
For establishing your AML/CTF compliance policies and processes: