Obligations
Beneficial ownership (UBO) explained: the 25% rule, control tests and layered structures
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
- Trustee: controls the trust's assets — always identify and verify (individuals behind corporate trustees too)
- 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: named classes matter less for CDD than the controllers, but default and takers-in-default provisions can surprise
When nobody reaches 25%
Widely held structures happen. The answer is not 'no beneficial owner recorded' — it is control: identify the senior managing officials or the people who otherwise control the entity, and record that you worked through ownership first. An examiner wants to see the working, not 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
Frequently asked 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?
The priority is control: trustee, appointor and anyone else who controls the trust. Beneficiary classes inform risk but the named individuals who control the structure are the CDD targets.
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?
On a risk-based cycle — commonly six-monthly for high risk, annually for medium, every two years for low — plus immediate review on any ownership or controller change.
Put it into practice
Cassandra AML turns these obligations into a working system: designated-service decisions, customer due diligence, screening, monitoring and reporting records — hosted in Sydney, free to start.
This guide is general information for Australian professionals. It is not legal advice and does not replace the AML/CTF Act, the AML/CTF Rules or AUSTRAC guidance. Confirm your specific obligations with AUSTRAC or a qualified legal adviser.