Those with less honourable intentions may seek the opportunity to retain control over criminally derived assets while frustrating the ability of law enforcement to trace the origin and ownership of assets – and companies, trusts or other similar legal arrangements. These are seen by criminals as potentially useful vehicles to achieve this outcome.
The concept of Ultimate Beneficial Owners (UBOs) exists to counter the practice of using complex structures or legal persons to conceal true ownership.
An Ultimate Beneficial Owner (UBO) is effectively the person/s at the top of the tree – who have ultimate benefit from, or ultimate control of an entity and its operations.
Whilst it’s usually a natural person majority shareholder, not all entities have a majority shareholding or even shareholding at all. In this case you can take a risk-based approach and use a process of elimination, looking first for ownership, and then control. For example, in the case of Trusts you may look to identify the Donor in order to understand the source of assets or funds, then the Trustee to identify who can control the assets and the Beneficiaries to understand who can benefit from the asset distributions.
Identify and Verify All UBOs
In the same way you must identify and verify your clients, The FIC Amendment Act requires that you identify and verify all UBOs.
Step 1: Identify and verify the client entity or legal person.
Step 2: Research the ownership structure.
Step 3: Identify the UBO through a process of elimination.
Step 4: Identify and verify these UBO parties.
Example of how to proceed with step 3 include asking yourself:
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Who has controlling ownership of the legal person? (e.g. the natural person/s with 5% of greater shareholding of a Pty)
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Who exercises controlling rights over the legal person? (e.g. the Elected Chairman of a residential management company)
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Who exercises management control over the legal person? (e.g. the CEO, CFO and COO of a listed company)
