The part of business onboarding that takes the longest

Onboarding an individual client is a straightforward problem. Verify the identity, screen against sanctions and politically exposed person lists, ensure the risk assessment is completed, consider EDD where required, move on.

Onboarding a company is a different job. The firm has to establish what the company is, who runs it, who owns it, and who ultimately benefits from it. Only the first two of those are visible at a glance. The rest is a research task, and for most Australian private companies it is a research task with a trust in the middle of it.

Australian law firms taking on business clients are working through this now, because their customer due diligence obligations require them to identify beneficial owners rather than simply record the directors. The ASIC record is where that work starts. It is worth being precise about what it gives you.

What the ASIC record actually contains

ASIC holds the current details of a registered company: its ACN, its registered office, its status, and the individuals recorded as directors, secretaries and other officers. It also holds the share register.

The share register is the part firms underuse. ASIC records shareholdings at share-parcel level, meaning each block of shares of a given class held by a given shareholder is its own record. Against each parcel, ASIC records whether that parcel is beneficially held. That field is mandatory.

This matters more than it sounds. A single shareholder can appear twice on the same register, holding one parcel in its own right and another as trustee. Any system that collapses that to one answer per shareholder loses the distinction, and the distinction is the whole point. A holding flagged as not beneficially held is a signal that the shares are held for someone else. That is exactly the case where a firm needs to keep looking.

Where the register shows a corporate shareholder, the answer is one layer up. Where that shareholder is itself owned by companies, the answer is further up again. Australian professional practices and family businesses are routinely structured this way, and unwinding four or five layers by hand means buying a separate report on every entity in the chain.

Where the trail goes cold

Tracing ownership upward does not always end at a named person.

A trust or partnership that is not registered with ASIC has no register to look at. A parcel held on behalf of an undisclosed party names the holder, not the beneficiary. A foreign company in the chain sits outside ASIC's remit entirely.

No provider working from Australian registry data can get past these, because the information is not in the register to retrieve. What a firm can reasonably expect is to be told clearly where the chain stopped and why, so the remaining work can be done directly with the client.

Trust structures are the common case, and they are where the register hands over to the document. ASIC does not hold the contents of trust deeds. The trustee, the beneficiaries, the settlor and the appointer are in the deed, and the appointer is the one most often missed. Someone with power to remove and replace a trustee controls the trust without holding any beneficial interest in it. Reading the deed is the only way to find them. This is where Legl's holistic approach to AML compliance and due diligence gives firms the edge: by simply uploading a trust deed to Legl, firms can get clear information about settlors, beneficiaries, associated business entities and more, enabling fast further analysis of individuals to further the AML compliance process.

The workflow problem sitting on top of the data problem

Many firms run this process across two or three tools. A company search in one place. The director names re-typed into a screening tool. A set of PDFs saved into the matter file, and a note somewhere recording that the checks were done.

The failure mode is not usually that a check gets missed. It is that the record of the check lives somewhere other than the client file, in a format nobody can interrogate later. When a firm needs to show its work, it is reassembling it from PDFs.

There is also the re-keying. On a company with twenty-plus directors and shareholders, typing names into a screening tool is roughly an hour of chargeable time producing nothing a client would pay for, and every keystroke is a chance to screen the wrong person.

How this works in Legl

Legl has a holistic approach to AML compliance across individuals and businesses. Company verification sits seamlessly alongside other connected processes like identity verification, screening and analysis of documents like trust deeds.

The company report that Legl generates draws on ASIC data and presents the shareholding at parcel level, with the beneficial ownership indicator against each parcel. Where a firm needs the full picture, the report traces the ownership chain upward through every corporate layer and identifies the ultimate beneficial owners, rendered as an interactive group structure chart you click through rather than a diagram you read. Where the chain stops, the report shows the entity it stopped at.

Because the officers of the intermediate companies are surfaced in the same report, a firm does not have to buy a separate search on each entity in the chain to see who runs it.

Directors and shareholders can then be screened for sanctions, politically exposed person status and adverse media directly from the report. No export, no re-keying, and the screening result attaches to the client record rather than to a PDF. Further, individual directors can complete verification of identity checks seamlessly through Legl, with all the information connected and designed to accelerate faster decision-making in the firm.

Where a trust sits in the structure, Legl analyses the trust deed and extracts the parties, which picks the process up at the point the register leaves off. This analysis simplifies the process of understanding the trust and the next steps required across associated businesses or individuals.

With Legl, there are escalation routes built automatically, audit trails that can be used to evidence the steps that the firm has taken, insights and analysis from centralised compliance dashboards and more - all designed to help firms to manage their regulatory requirements effectively and efficiently.

Where to start

If you are reviewing how your firm onboards business clients, three questions are worth asking of whatever you use today.

Does it show beneficial ownership at share-parcel level, or one value per shareholder? Does it tell you where the ownership chain stopped? And how much of your team's time goes into moving data between the tool that finds it and the tool that checks it?

If you want to speak to the Legl team about how we can support your firm, please get in touch today.