Australia’s AML reforms are moving steadily toward implementation, and today’s article turns to one of the most consequential elements for professional firms: beneficial ownership. It is the area where global standards have moved fastest, where FATF expectations are clearest, and where countries like Australia are moving forward to make up ground.

For lawyers, accountants and trust service providers, the shift will be significant. Beneficial ownership is no longer a box ticking exercise. It is a question of understanding who really ultimately controls the client, who benefits from the transaction, and whether the structure makes sense in the real world.

This article sets out where Australia stands today, how international expectations have evolved, and what Tranche 2 will require from firms that have never had to document beneficial ownership in a structured, defensible way.

1. Australia’s current position
Australia has pockets of beneficial ownership requirements scattered across corporate law, tax, trust law and financial services regulation. But there is no unified, AML driven framework that applies to professional firms in the way it does, say, in the UK, New Zealand, Singapore or the EU.

The result is a system where firms often collect some ownership information, but rarely in a way that meets modern AML expectations. Awareness has been rising, but structures may be accepted at face value. Trusts may be treated as routine. Corporate layers may be noted but not interrogated. And the question of who ultimately controls the client may be left unanswered.

FATF has been clear for years that this is a vulnerability. Australia’s last evaluation highlighted the lack of transparency around beneficial ownership as a material weakness, and the government has already committed to reforms that will bring the country closer to international norms.

Tranche 2 is the mechanism that will make this real for professional firms.

2. What international standards now expect
Across common law and quasi common law jurisdictions, beneficial ownership expectations have converged around three core requirements:
• Identify the natural persons who ultimately own or control the client, regardless of how many layers sit between them and the entity.
• Verify those individuals using reliable, independent sources that confirm identity and plausibility.
• Understand the purpose of the structure and assess whether it is consistent with the client’s profile, the transaction and the jurisdictional risks involved.

In the UK, New Zealand and Singapore, this is now embedded in required practice. Firms are expected to map ownership chains, identify controllers, understand trust arrangements and document the reasoning behind their conclusions. The UAE has taken a similar approach, with a strong emphasis on identifying the individuals who exercise ultimate effective control.

Australia will be expected to meet the same standard.

3. Why beneficial ownership is at the centre of Tranche 2
Beneficial ownership is not an administrative requirement. It is the foundation of risk assessment. Without knowing who ultimately controls the client, firms cannot assess sanctions exposure, political influence, source of wealth or the legitimacy of the structure. If you don’t know who benefits from the structure, how do you know it’s not Nicholas Maduro or Vladimir Putin?

This is why Tranche 2 places beneficial ownership at the heart of the reforms. Lawyers, accountants and trust service providers will be required to identify and verify beneficial owners, understand the ownership and control structure, and document the rationale for accepting the client.

For many firms, this will be the most significant cultural shift. It requires moving from collecting information to understanding it, and from accepting structures to questioning them.

4. Trusts: Australia’s blind spot
Australia’s heavy use of discretionary trusts is well known, and it is one of the areas where international expectations have moved furthest. FATF and other regulators now expect firms to identify the individuals who ultimately control the trust, not just the named parties.

This includes the settlor, the trustee, the appointor, the beneficiaries and any individual who can influence the distribution of assets. In many cases, the appointor is the true controller, and firms will be expected to recognise this.

Under Tranche 2, firms will need to treat trusts as high risk structures unless they can demonstrate a clear understanding of who controls them and why the arrangement is appropriate.

5. Verification: the step that cannot be skipped
Identifying beneficial owners is only half the task. Verification is the part that international regulators focus on most heavily, because it is the step that prevents firms from relying on untested assertions.

Verification does not require perfection, but it does require a reasonable, documented effort to confirm that the individuals identified are real, that they exist where they claim to exist, and that the ownership structure is consistent with publicly available information.

This is where many firms will need new processes, new tools and new habits.

6. Reasoning: the part that distinguishes compliance from administration
The most common weakness in beneficial ownership files internationally is not the absence of information. It is the absence of reasoning.
Firms collect documents but do not explain why the structure makes sense, why the beneficial owners identified are the correct ones, or why the matter is acceptable. Regulators increasingly expect firms to articulate their thinking, not just assemble paperwork.

Tranche 2 will bring this expectation to Australia. Firms will need to record why they believe they have identified the correct beneficial owners, why the structure is legitimate and why the risks are manageable.

This is the part where human judgment and oversight is most important. It requires judgment.

7. What firms should be doing now
Even before Tranche 2 becomes law, firms can begin aligning with international best practice.

• Map ownership and control structures for new clients
• Identify natural persons behind companies, trusts and partnerships
• Verify those individuals using reliable sources
• Document the reasoning behind each conclusion
• Treat complex structures as higher risk unless proven otherwise
• Train staff to recognise when ownership information is incomplete or implausible

These steps will not only prepare firms for Tranche 2 but also reduce exposure to reputational and commercial risk in the meantime.


Conclusion: Beneficial ownership is where AML reform becomes real

Tranche 2 will change how Australian professional firms think about clients, structures and risk. Beneficial ownership is the part of the reform that will have the greatest practical impact, because it requires firms to understand who they are dealing with and why the structure exists.
This isn’t just a compliance exercise. It is a shift in professional practice and thinking. And it is the area where firms that prepare early will feel the greatest benefit when the reforms take effect.

To help with the transition, we’ve prepared a free Beneficial Ownership Checklist with Example Cases resource, which can be used within your firm for explaining the new expectations.

👉 Download the Beneficial Ownership Checklist with Example Cases