Skip to content
English - Australia
  • There are no suggestions because the search field is empty.

When the customer is a trust, do beneficiaries need to be identified and verified? How does this differ by trust type?

Yes, beneficiaries must be identified, with depth scaling by trust type; named beneficiaries are individually verified, while AUSTRAC accommodates class beneficiaries.

AUSTRAC's position on beneficiaries is explicit and well-stated. Beneficiaries must be identified as part of trust CDD, with the depth of identification and the treatment of named versus class beneficiaries depending on trust type. Verification depth scales with the trust's risk rating.

Named vs class beneficiaries

AUSTRAC's guidance includes an explicit accommodation for the discretionary trust pattern:

"For a trust or equivalent foreign arrangement, you don't need to take further steps to identify a person on whose behalf the customer is receiving the designated service, if you have established: ... a description of each class of beneficiary (if it is not possible to identify each beneficiary due to the nature of the trust)."

The distinction:

  • Named individual beneficiaries must be identified individually, with KYC information collected to the same depth as if they were the customer.
  • Class beneficiaries can be described by class — but only where individual identification "is not possible due to the nature of the trust." This is for genuinely indeterminate classes, not a shortcut to avoid identifying named people.

Treatment by trust type

  • Trust type: Discretionary trust
    Beneficiary treatment: Named/specified beneficiaries identified individually; broad classes (e.g. "any descendant", "any charity") described as a class. AUSTRAC rates discretionary trusts high ML risk; EDD often triggered.
  • Trust type: Unit trust (fixed)
    Beneficiary treatment: Unit holders identified individually as beneficiaries; verification depth scaled to risk. Unit holders may also be beneficial owners depending on holding size and control.
  • Trust type: Bare trust
    Beneficiary treatment: Beneficiary is typically also the beneficial owner (holds the equitable interest). Must be identified and verified as both. Common in nominee purchaser and SMSF custodial arrangements.
  • Trust type: Testamentary trust
    Beneficiary treatment: Beneficiaries named in the will/deed are identified individually. Where contingent or class beneficiaries exist, class description may apply.
  • Trust type: Hybrid trust
    Beneficiary treatment: Combines unit holders (named, identified) with discretionary class (described). Treat each component on its own footing.
  • Trust type: Charitable trust
    Beneficiary treatment: Beneficiaries are often described by purpose or class. Class description acceptable; the charitable purpose itself is relevant to risk.
  • Trust type: Foreign trust / equivalent arrangement
    Beneficiary treatment: Same framework applies. Foreign elements typically push the trust into medium or high risk, triggering full verification.

Australian family discretionary trust — practical application

The typical Australian family discretionary trust deed names specified beneficiaries and defines broader classes. The position is:

  • Specified beneficiaries (e.g. "John Smith and Mary Smith and their children Jessica Smith and Steven Smith") — named, identified individually, KYC information collected to the depth required if they were the customer, verified to a depth appropriate to risk.
  • General beneficiaries / wider class (e.g. "any descendant of the primary beneficiaries", "any spouse of a specified beneficiary", "any charity") — described as a class.

A reporting entity that treats all named beneficiaries as a class to avoid individual identification is misapplying the carve-out. The class description is for genuinely indeterminate beneficiaries, not as a way to bypass identification of beneficiaries who are named in the deed.

Common misconceptions

  • "Class description is always available for discretionary trusts."
    No - it's only available where individual identification of beneficiaries is not possible due to the nature of the trust. Named beneficiaries in a discretionary deed must be identified individually.
  • "You only need to identify beneficiaries who actually receive distributions."
    No - the obligation is to identify named beneficiaries at onboarding, not only at the point of distribution.
  • "Discretionary trust beneficiaries don't need to be verified."
    Incorrect - verification depth scales with the trust's risk rating. AUSTRAC rates discretionary trusts high risk, which usually triggers enhanced CDD and full verification.
  • "A bare trust is just a nominee arrangement and the trustee is the customer."
    Incorrect - the beneficiary in a bare trust is typically the beneficial owner and must be identified and verified.

Related articles