Customer identification and due diligence overview
As a reporting entity, you must identify and know your customers.
The customer identification procedures – know your customer (KYC) procedures – must be documented in Part B of your AML/CTF program. All AML/CTF programs must include a Part B program.
To identify, mitigate and manage money laundering/terrorism financing (ML/TF) risk, you should develop ongoing customer due diligence processes. This includes developing and documenting an enhanced customer due diligence program and transaction monitoring program in Part A of your AML/CTF program. Holders of an Australian Financial Services Licence (AFSL) who arrange for their customers to receive a designated service, and do not provide any other designated services, do not have to have a Part A program.
Customer identification and ongoing customer due diligence processes should provide you with information to help you identify unusual transactions and behaviour, to identify and manage high-risk customers and report suspicious matters if appropriate.
Identifying and verifying customers: Part B of your AML/CTF program
Part B of your written AML/CTF program must document in detail the procedures you use to identify your customers and verify that their information is correct. After using these ‘applicable customer identification procedures’ you must be reasonably satisfied that:
- an individual customer is who they claim to be
- a customer who is not an individual (such as a company, association or trust) is a real entity and you know the details of its beneficial owners.
Applicable customer identification procedures include:
- collecting and verifying customer identification information through know your customer procedures
- identifying and verifying the beneficial owner(s) of a customer
- identifying whether a customer or beneficial owner of a customer is a politically exposed person (PEP)
- getting information on the purpose and intended nature of the business relationship.
Through knowing your customers you should be able to recognise activities or transactions that don’t fit their usual patterns.
Ongoing customer due diligence procedures: Part A of your AML/CTF program
Part A of your AML/CTF program must include ongoing customer due diligence (OCDD) systems and controls to decide whether additional customer and beneficial owner information should be collected and verified on an ongoing basis. OCDD includes ensuring the information you have about your customer is up to date, transaction monitoring and enhanced customer due diligence (ECDD). Enhanced customer due diligence procedures must be applied when there is a high risk of money laundering or terrorism financing.
The content on this website is general and is not legal advice. Before you make a decision or take a particular action based on the content on this website, you should check its accuracy, completeness, currency and relevance for your purposes. You may wish to seek independent professional advice.