Beneficial Ownership: A Practical Guide for Accountants

Under Tranche 2 of the AML/CTF Act 2006, accounting firms will be required to look beyond the company name on a client's letterhead and identify the real human beings who ultimately own or control that entity — a process known as beneficial ownership verification. With the 1 July 2026 compliance deadline now just 70 days away, understanding this obligation in concrete, practical terms is one of the most important things an accounting firm can do right now.

What Is a Beneficial Owner Under Australian Law?

A beneficial owner is the natural person — or persons — who ultimately owns or exercises effective control over a legal entity, whether that's a company, trust, partnership, or other arrangement. The concept is central to anti-money laundering frameworks globally because layered corporate structures are one of the most common tools used to conceal the proceeds of crime.

Under the AML/CTF Act 2006 as amended by the Tranche 2 reforms, reporting entities — including accountants providing designated services — must identify beneficial owners and take reasonable steps to verify their identities. AUSTRAC defines a beneficial owner as a natural person who holds a controlling interest of generally 25% or more of voting rights or economic ownership, or who exercises control through other means.

Critically, the 25% threshold is a starting point, not a safe harbour. Accountants must look for effective control even where no single person meets that threshold — a common feature of structures deliberately designed to obscure ultimate ownership.

Which Accounting Services Trigger This Obligation?

Not every service an accounting firm provides will give rise to AML/CTF obligations. Under the Tranche 2 reforms, the designated services most relevant to accountants include:

• Assisting a client to buy or sell a business or business assets

• Assisting with the creation, operation, or management of a legal arrangement — such as a company, trust, or partnership

• Acting as a registered agent or providing a registered office address

• Managing client money, securities, or other assets on their behalf

• Bookkeeping and financial record management in certain circumstances beyond routine tax compliance work

If your firm provides any of these services, you are a reporting entity under the Act, and beneficial ownership verification is a core compliance obligation — not an optional best practice you can defer.

How Do You Actually Identify a Beneficial Owner?

Identifying a beneficial owner sounds straightforward in principle but quickly becomes complex when clients operate through layered structures. A practical, step-by-step approach looks like this:

1. Obtain the legal structure documents — Start with an ASIC extract, trust deed, partnership agreement, or equivalent. Map out who holds shares, units, or interests at the top level.

2. Apply the 25% threshold at each layer — Identify any natural person holding 25% or more of ownership interests or voting rights at every layer of the structure.

3. Trace through every intermediate entity — If a corporate entity holds 25% or more at any layer, continue up the ownership chain until you reach a natural person. There is no limit to the number of layers you must trace through.

4. Look for control by other means — Even where no individual crosses the 25% threshold, look for persons who exercise control through board appointment rights, contractual veto powers, or other formal or informal arrangements.

5. Document your methodology, not just your conclusion — AUSTRAC expects to see how you arrived at your identification, not merely who you identified. A well-maintained audit trail is essential.

6. Verify the identity of each beneficial owner — Identification is not the same as verification. Once you know who the beneficial owner is, you must confirm it using reliable, independent evidence.

What Does Verification Actually Involve?

Identification and verification are two legally distinct obligations under the AML/CTF Act 2006. Identifying a beneficial owner means establishing who they are; verifying means confirming that through independent sources.

For most beneficial owners, standard customer due diligence will involve confirming:

• Full legal name — as shown on a government-issued identity document

• Date of birth

• Residential address — a PO box is not sufficient

• Identity document details — passport or driver's licence number and the issuing body

For higher-risk clients — including those from high-risk jurisdictions, politically exposed persons (PEPs), or clients with complex or opaque ownership structures — enhanced due diligence is required. This may involve source of wealth documentation, adverse media checks, and more frequent periodic review of the client relationship.

AMLify's platform guides your team through both identification and verification steps at onboarding, with built-in prompts that adapt to client risk level and automatically flag cases requiring enhanced due diligence. See how it works at /features.

What Red Flags Should Accountants Be Watching For?

AUSTRAC guidance identifies a number of red flag indicators specific to complex ownership structures and entity formation. Accountants should be alert to:

• Reluctance to disclose beneficial owners — a client who is unusually resistant to providing ownership information without a plausible explanation

• Frequent or unexplained changes in ownership — particularly where changes cluster around significant transactions or asset transfers

• Nominee shareholders or directors — arrangements where the nominated person appears to have no genuine commercial role

• Circular ownership structures — entities that appear to own each other, making it difficult to trace to a natural person

• Involvement of high-risk jurisdictions — FATF grey-listed or black-listed countries appearing anywhere in the ownership chain

• Mismatch between stated business purpose and ownership complexity — for example, a simple trading business operating through eight layers of holding companies

Identifying a red flag does not automatically mean refusing the client. It means applying enhanced due diligence, documenting your reasoning thoroughly, and — if suspicion persists after further enquiry — considering whether a Suspicious Matter Report (SMR) to AUSTRAC is required.

Why This Matters More Than It Might Seem

Accountants are uniquely positioned in the financial system. They are often the first professional a client engages when structuring a business, acquiring assets, or reorganising affairs. That positioning is exactly why the Tranche 2 reforms bring accounting firms inside the AML/CTF regime: accountants frequently see the full picture of a client's financial life in a way that banks and other financial institutions do not.

AUSTRAC has been clear that it views DNFBPs — designated non-financial businesses and professions, the group that includes accountants — as gatekeeper professions. The expectation is not just technical compliance with the Act, but genuine engagement with the spirit of anti-money laundering obligations. Firms that treat beneficial ownership verification as a tick-box exercise rather than a genuine risk management tool are likely to find that AUSTRAC's supervisory interest follows accordingly.

Building beneficial ownership verification into your standard client onboarding workflow now — rather than retrofitting it under deadline pressure — is the most practical way to embed these obligations sustainably. Explore how accounting firms are using AMLify to do exactly that at /industries/accountants.

Key Takeaways

• Beneficial ownership verification is a mandatory obligation for accountants providing designated services under the Tranche 2 reforms, with the 1 July 2026 deadline now 70 days away.

• The 25% ownership threshold is a floor, not a ceiling — accountants must also identify control exercised through board positions, contractual rights, and other non-ownership arrangements.

• Layered corporate structures require full tracing at every level until a natural person is reached, regardless of how many intermediate entities are involved.

• Identification and verification are legally distinct steps — establishing who a beneficial owner is must be followed by confirming that identity through reliable, independent sources.

• Red flags require enhanced due diligence and documentation, not automatic refusal — but structures that remain suspicious after further enquiry may give rise to an obligation to file a Suspicious Matter Report with AUSTRAC.

Frequently Asked Questions

Q: What is the 25% ownership threshold for beneficial owners?

The 25% threshold is the standard benchmark used under the AML/CTF Act 2006 — any natural person holding 25% or more of the shares, voting rights, or economic interest in a legal entity is treated as a beneficial owner for compliance purposes. However, this threshold is a starting point rather than a complete definition. Accountants must also identify individuals who exercise effective control through other means, such as board appointment rights or contractual veto powers, even where their direct ownership stake is below 25%.

Q: Do I need to check beneficial ownership for every accounting client?

You need to apply beneficial ownership verification to every client for whom your firm provides a designated service as defined under the AML/CTF Act 2006. For lower-risk clients with simple, transparent ownership structures — for example, a sole trader or a two-person company with straightforward shareholding — standard customer due diligence will generally be appropriate. For higher-risk clients, including those with complex structures, connections to high-risk jurisdictions, or PEP status, enhanced due diligence is required. Your firm's AML/CTF programme should set out a risk-based approach that determines the appropriate level of scrutiny for each client.

Q: What happens if a client refuses to identify their beneficial owners?

Refusal to disclose beneficial ownership information is itself a significant red flag under AUSTRAC guidance. If a client is unable or unwilling to provide the information needed to satisfy your identification and verification obligations after reasonable enquiry, you should not proceed with providing the designated service. Depending on the circumstances and the level of suspicion, you may also have an obligation to file a Suspicious Matter Report with AUSTRAC. It is essential to document your decision-making process and the steps you took, as this forms a key part of your compliance record.

Q: How often do I need to update a client's beneficial ownership information?

The AML/CTF Act 2006 imposes an ongoing customer due diligence obligation, which means beneficial ownership information should not be treated as a one-time collection exercise. It should be reviewed and updated whenever there is a material change in the client relationship, when a new designated service is provided, or as part of a scheduled periodic review cycle. High-risk clients should be reviewed more frequently than lower-risk clients. Your AML/CTF programme should set clear triggers and timeframes for each risk tier.

Q: Can compliance software help with beneficial ownership verification for accounting firms?

Yes — purpose-built AML/CTF platforms like AMLify can significantly reduce the manual burden of beneficial ownership verification by guiding your staff through structured client onboarding workflows, maintaining a complete and searchable audit trail, and automatically flagging cases that require enhanced due diligence. This is particularly valuable for firms onboarding clients with complex corporate structures, where the tracing and documentation requirements would otherwise be time-consuming and error-prone.

This is general information only and not a substitute for legal advice.