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

When providing a nominee is a designated service

For an acting director under item 7, AUSTRAC's guidance requires the nominator to retain control over fulfilment of the role and the director to act on the nominator's wishes and instructions. An ordinary agent performing only administrative or procedural steps is not captured on that basis alone. Item 8 applies where the shareholder holds shares or an interest for the nominator and exercises associated voting rights according to the nominator's instructions or receives dividends on the nominator's behalf. Test the actual agreement, authority and conduct rather than the job title.

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

The critical file entry is the evidenced mapping between the acting person, the nominator and the relevant entity or arrangement. Apply initial CDD to the customer, identify and verify ownership or control as required, and use the role evidence in the service and risk assessment.

• The customer for item 7 or 8: the nominator on whose behalf the role is performed
• The nominator's representatives, authority and beneficial owners where the nominator is an entity or arrangement
• The person who will occupy the role and the body corporate or legal arrangement in which the role exists
• The agreements, voting, dividend and instruction evidence showing how the role operates

Assess nominee risk without an automatic outcome

Nominee status is a relevant risk factor, not an automatic high-risk rating or an automatic ECDD result. Assess the transparency, commercial rationale, control and instructions, ownership layers, jurisdictions, delivery channel and customer behaviour under the program's documented methodology. Apply enhanced CDD when a statutory or program trigger is met, and tailor deeper verification, source enquiries, approval or monitoring to the risk identified.

Red flags specific to nominee arrangements

Treat these indicators as prompts for review and escalation. Lodge an SMR only if the available facts establish reasonable grounds for a section 41 suspicion, then meet the applicable deadline. Do not disclose protected SMR-related information where that would or could reasonably be expected to prejudice an investigation.

• 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