Onboarding Customers with Complex Ownership Structures

Q3 2025 Quarterly Training

Lan’s Enterprise Limited Training Program

Training Objectives

What you’ll learn today:

  • Understand obligations for penetrating complex ownership structures
  • Identify beneficial owners through multi-layer entities
  • Apply Enhanced CDD in high-risk scenarios
  • Navigate trust structures and nominee arrangements
  • Establish effective control in layered ownership

Why This Matters

AML/CFT Obligations

Reporting entities must go beyond surface-level ownership and penetrate through complex structures to identify ultimate beneficial owners (UBOs) and effective controllers.

Key requirement: Look through holding companies, nominee arrangements, partnerships, and trusts to reach natural persons.

Standard CDD Requirements

Entity Information

  • Full legal name and trading name
  • Registered office and physical business address
  • Certificate of incorporation and company registration number
  • Company extract showing controlling persons
  • Industry classification and public information

Standard CDD Requirements

Individuals to Identify

  • All directors - ID and proof of address
  • All shareholders >25% - ID and proof of address
  • Authorized persons - ID and proof of address
  • Nominee arrangements - triggers Enhanced CDD

Additional Considerations

Risk Assessment Factors

  • Trusts, partnerships, or offshore entities in ownership chain
  • Open-source checks for adverse information
  • Media, reports, and social media screening
  • Heightened risk indicators

Defining Beneficial Owners

A beneficial owner is any natural person who:

  1. Owns more than 25% of the customer
  2. Has effective control of the customer
  3. Is the person on whose behalf a transaction is conducted

Important: UBO is always an individual, not an entity.

Multi-Layer Ownership Example

Tracing Through Structures

Cards Ltd ownership:

  • John: 20.0%
  • Les: 15.5% (5% + 15% × 70%)
  • Sally: 8.5% (5% + 5% × 70%)
  • Don: 56.0% (70% × 80%)

Result: Don is the beneficial owner with >25% indirect ownership through Hiddeh Ltd and Telli Ltd.

Understanding Effective Control

When directors sit at second layer or beyond

Review whether they exercise effective control through:

  • Company constitution or governance documents
  • Self-certification forms from directors or trustees
  • Control indicators assessment

Indicators of Effective Control

Key Control Factors

  • Shareholding/voting rights: >25% shares or voting rights
  • Trustee authority: Managing trust assets for the customer
  • Operational decisions: Key business and governance decisions
  • Personnel appointments: Power to appoint/remove directors
  • Financial control: Managing accounts and reporting

Enhanced Due Diligence Triggers

Apply EDD when:

  • Structures are opaque or involve high-risk jurisdictions
  • Nominee directors, shareholders, or partners are involved
  • Offshore structures obscure beneficial ownership
  • Customer acts as trustee for a trust
  • Other scenarios per EDD and PEP guidelines

Enhanced CDD Requirements

Additional Steps for High-Risk Structures

  • Obtain source of funds (SoF) and source of wealth (SoW)
  • Require senior management approval before onboarding
  • Apply additional transaction monitoring once established
  • Document rationale for accepting higher-risk relationships

Complex Structure Decision Tree

Three Main Categories

  1. Beneficial Ownership (>25%)

    • Direct or joint shareholding

  2. Trust Structures

    • Customer is trust or trust holds >25%

  3. Nominee Arrangements

    • Nominee directors/partners/shareholders

Beneficial Ownership: Joint Holdings

Joint Tenants vs Tenants in Common

Joint Tenants (jointly held):

  • Each individual does not own a divisible percentage
  • They own together as a unit
  • Each has effective control on behalf of trust/as trustees

Tenants in Common:

  • Each owns a divisible portion
  • Not captured if individual portion ≤25%

Trust Structures: Documentation

When Trust is Customer or BO holds >25%

Obtain trust deed (and any amendments) showing:

  • Settlor(s)
  • Trustee(s)
  • Name, type, and address of trust

Alternative: Letter from lawyer (secondary evidence) with documented rationale

Trust Structures: Corporate Trustees

Family Setup

  • Use Effective Control Self-Certification Form
  • Client signs the form
  • CDD on whoever named in form (at least 1 person)

Professional Setup

  • Use Professional Trustee Self-Certification Form
  • Professional trustees sign
  • CDD on at least 1 director involved with client

Trust Structures: Types of Trusts

Fixed Trust

  • Beneficiaries >25% benefit: CDD required (are BOs)
  • Beneficiaries <25% benefit: Obtain name and DOB only, no verification

Discretionary Trust or >10 beneficiaries

  • Obtain description of each class/type of beneficiaries

Trust Structures: Types of Trusts

Charitable Trust

  • Obtain description of the objects of the trust

Other Trust with <10 beneficiaries

  • Obtain name and DOB of each beneficiary
  • No verification required

Nominee Arrangements

Enhanced Due Diligence Required

Nominee Director/Partner:

  • Not explicitly stated in registries
  • Use Professional Nominee Self-Certification Form

Nominee Shareholder:

  • Regardless of shareholding percentage
  • Obtain SoF/SoW of client

Key principle: UBO is always an individual

Source of Wealth Requirements

When to Obtain SoW

  • Trust as the Customer: SoW required
  • Trust as BO only: SoW not required
  • Nominee arrangements: SoF/SoW of client required
  • High-risk structures: SoW documentation mandatory

Verification Challenges

When Independent Verification is Difficult

For offshore jurisdictions:

  • Use the most reliable sources available
  • Document all attempts to verify
  • Retain evidence of successful AND unsuccessful attempts

Best practice: Show your work and reasoning.

Ongoing Monitoring Obligations

Throughout the Relationship

  1. Conduct OCDD and transaction monitoring continuously
  2. Refresh CDD periodically or when triggers arise:
    • Changes in ownership structure
    • Abnormal transaction patterns
  3. Investigate unusual activity promptly
  4. Report suspicious matters to FIU as required

Record Keeping Requirements

Comprehensive Documentation

  • Detailed records of CDD/EDD steps
  • Ownership tracing and chain of control
  • Rationale for all decisions
  • Evidence of verification attempts (successful and unsuccessful)
  • Beneficial ownership structures with intermediate entities

Retention: Maintain for required regulatory period

Practical Application Steps

Your Onboarding Checklist

  1. Understand structure: Legal form, ownership, control
  2. Apply appropriate CDD: Standard or Enhanced
  3. Trace beneficial ownership: To natural persons
  4. Verify using reliable sources: Document attempts
  5. Monitor ongoing: Refresh when triggers arise

Common Pitfalls to Avoid

Watch Out For

  • Stopping at first layer without tracing to UBOs
  • Accepting nominee arrangements without Enhanced CDD
  • Failing to document verification attempts
  • Not identifying effective controllers when no single person holds >25%
  • Overlooking trust structures in ownership chain

Key Takeaways

Remember These Points

  1. Penetrate beyond surface ownership

    • Always trace to natural persons (UBOs)

  2. Apply Enhanced CDD for complex structures

    • Nominees, trusts, offshore entities require EDD

  3. Document your entire process

    • Show your work, reasoning, and all attempts

Key Takeaways (continued)

Remember These Points

  1. Understand effective control

    • Look beyond 25% threshold to governance power

  2. Use decision trees and self-certification forms

    • Systematic approach ensures compliance

Contact & Resources

For Further Information

  • AML Compliance Team: aml@gmfinance.co.nz
  • Emergency Hotline: +64 09-309-8808
  • Training Program: Lan’s Enterprise Limited

Questions?

Thank You

Stay Vigilant, Stay Compliant