New laws for full beneficial ownership traceability

Between November and December of 2022, the Federal Government released a consultation paper seeking comments on the design features for the first phase of a publicly available beneficial ownership register. Stakeholders were invited to provide feedback on proposed changes to the Corporations Act 2001 (Cth). The aim of these changes is to establish a new register that maintains current and accurate data specifying the ultimate beneficial owner of shares in a company for listed and unlisted corporate entities, including registered management investment schemes and unlisted collective investment vehicles.

A key issue that emerged was the impact on privacy. In response, the Australia Government Solicitor (AGS) undertook a Privacy Impact Study, which was released on 5 December 2024.  The Study identified a number of privacy concerns and suggested ways that might mitigate various aspects of these concerns.

On the same day as the Privacy Impact Study was made public, Treasury reconfirmed the Government’s position that it was committed to establishing the proposed public register.  They also released the Policy Specifications, which broadly sets out its plans for the proposed new legislation that will be drafted and how this new disclosure regime is intended to be implemented and operate.

What will the Policy do?

In summary, the released Policy Specifications paper identifies the proposed key ideals and features as  follows.

• The reason for the introduction of the Policy is to create more transparency in relation to who are the ultimate beneficial owners of shares in a company so as to help in the tackling anti-money laundering and terrorist financing.
• It notes that publicly listed companies are already subject to some disclosure measures but Treasury deemed that these needed further expansion.
• It further notes private companies are not subject to disclosure requirements and seeks to change this so that they are subject to the same rules as public companies.
• The proposed changes will affect not only public ‘Ltd’ and private ‘Pty Ltd’ companies, but also:
  • Partnerships
  • Foreign companies not registered in Australia and who are not located in a jurisdiction with equivalent disclosure obligations
  • Trusts (including SMSF’s and SAF’s)
  • Associations
  • Co-operatives.
• The current proposal is that the threshold for disclosure is where a party owns, either directly or indirectly, 25% of the voting power or shares in an entity.
• The changes will require:
  • affected entities to collect, verify and record information about beneficial owners
  • beneficial owners to self-identify to unlisted companies, and
  • grants new powers to ASIC to enforce these new obligations, including through new broad freezing powers.
• The Policy incudes a list of bodies that are proposed to be exempt, these include:
  • Natural persons
  • Not for profits and charities
  • Listed entities
  • MISs, CCVIs, RSEs
  • Indigenous bodies
  • Foreign corporations not listed in Australia who are located in a jurisdiction with equivalent disclosure obligations.

Privacy concerns

From the outset, a number of parties raised various privacy concerns in respect of have a public register of this type and how the data, which will be required to enable the multiple bodies including companies themselves “collect, verify and hold” full traceability, will be obtained kept safe and secure given the significant risk to parties if this sensitive information is made public as proposed, which would include passports, drivers licences, addresses and copies of other financial and legal documentation.

In light of these concerns and following the AGS Privacy Impact Study, the Policy has proposed that initially the following category of persons will be able to get access to the register, which would include all information available for searching:

• Journalists
• Academics
• Entities that are subject to KYC obligations under the AML/CTF regulatory regime.

These categories are broad particularly noting, in light of new AML/CTF law changes passed by parliament, the same includes lawyers and accountants, conveyancers, real estate agents, various financial institutions, brokers etc.

Next steps

Given the recent publication from Treasury, we are currently awaiting the drafting of the proposed legislation to review and consider.

It has not gone unnoticed that this paper, and the matters discussed within it, come at the same time that recent changes to the Anti-money Laundering and Counter-terrorism Financing legislation changes have been passed by parliament. With those changes planned to be rolled out over the next 12-18 months, the Government will no doubt be pressed to see this Policy implemented beforehand given many of the topics covered go directly to various new regulatory requirements.