Nominee directors and shareholders: AML/CTF obligations when you act or arrange the role

When providing a nominee is a designated service

The AML/CTF Act captures acting as, or arranging for another person to act as, a nominee director, secretary, officer or shareholder of a company, or in an equivalent position in another legal arrangement. It does not matter that you never touch the client's money: the service itself is captured. This applies to TCSPs whose core business is these roles, and to accountants and lawyers who put a staff member or associate on a client's register.

Who you must verify — and it is more than the client

The critical file entry is the mapping between the nominee and the principal. A nominee shareholding with no recorded principal is a compliance failure waiting for an examiner.

• The instructing client: the person or business engaging you
• The principal: every individual on whose behalf the nominee acts — the real owner behind the nominee shareholding or the real controller behind the nominee directorship
• The entity itself: registration details, structure and the individuals who ultimately own or control it
• Screen everyone identified: sanctions, PEPs and adverse media

Why nominee work is higher risk by design

A nominee's purpose is to stand between the public record and the real controller. Legitimate reasons exist — administrative convenience, privacy for genuine safety concerns, group structuring — but your program must treat nominee arrangements as elevated risk by default. Expect to apply enhanced due diligence in most cases: deeper verification of the principal, a documented commercial rationale for the arrangement, senior approval, and more frequent review.

Red flags specific to nominee arrangements

If a nominee arrangement smells like deliberate concealment, that is suspicious-matter territory: report to AUSTRAC, generally within three business days, and never tip off the client.

• The client cannot or will not name the principal, or the named principal is implausible
• Nominee requests layered across multiple entities or jurisdictions with no business logic
• The arrangement seems designed to defeat a specific registry, tax or disclosure requirement
• The principal is a PEP or is linked to adverse media — escalation, not refusal-by-default, but senior decision-making is essential
• Requests to backdate or obscure when the nominee role began

Running nominee services inside a program

• A written nominee policy: when you will act, what you require first, and who approves
• Verification of the principal before the role starts, every time
• A register linking each nominee position to its principal, review dates and approvals
• Exit discipline: when the relationship ends, resign the position and record it
• Seven-year retention of the verification, the rationale and every decision