The normal rule and the exception
Initial customer due diligence (CDD) normally comes before the designated service. Section 29 permits a delay only when a specified Rules provision and all applicable conditions are met.
The business must have reasonable grounds for two conclusions. Starting early must be essential to avoid interrupting the ordinary course of business. The additional financial crime risk from the delay must be low.
The business must also have policies for timely completion and implement policies to manage the delay risks. Inconvenience alone is not enough.
Sources: Federal Register of Legislation: Sections 28 and 29; AUSTRAC: General requirements; Interrupting the ordinary course of business.
- Normal timing
Initial CDD normally comes before the designated service.
- Applicable provision
Identify the specified Rules provision and all applicable conditions.
- Completion
Complete CDD as soon as reasonably practicable within the applicable limit.
Identify the rule before using a delay
This is a reading guide, not a complete permission test. The service, risk conditions and transfer restrictions can differ.
Follow the process from top to bottom.
Limited delayed verification in Australia
Rules section 6-12 concerns services at or through an Australian permanent establishment. It does not apply where sections 6-13, 6-14 or 6-32 apply.
Before starting, the business must identify customer risk and collect the required risk-appropriate know your customer (KYC) information. It must establish customer identity and the identity and authority of anyone acting for the customer.
Reasonable steps to establish an individual customer’s identity also remain necessary.
Initial CDD must finish as soon as reasonably practicable and within 20 business days. Until completion, the business must not transfer money, property or virtual assets for or on behalf of the customer. It must not allow or facilitate those transfers. It must not otherwise make those assets available, except by holding them in an account or on deposit from the customer.
Source: Federal Register of Legislation: Section 6-12(1) to (5).
Other services have separate rules
Sections 6-13 and 6-14 cover specified account services and financial market transactions. Section 6-15 concerns services through a foreign permanent establishment and the applicable foreign law.
These provisions have different conditions. The Australian section 6-12 limit cannot be copied into every service process.
Source: Federal Register of Legislation: Sections 6-13 to 6-15.
Real estate parties and timing
Section 6-32 covers specified real estate circumstances through an Australian permanent establishment. For a broker already serving one party, the delay can concern the opposite party.
The provision also covers specified professional assistance for a buyer or transferee. It does not give every professional a delay for every property customer.
The outer limit is the earlier of 28 days after contract exchange and 3 days before the initially agreed settlement day. Section 29 still requires completion as soon as reasonably practicable.
Sources: Federal Register of Legislation: Section 6-32(1) to (4); Federal Register of Legislation: Section 29.
An early completion date still matters
A fictional business meets the section 6-12 conditions. Reliable information becomes available on the second business day. The 20-day limit does not justify leaving verification until day 20.
The business records the applicable rule, its reasons, the incomplete matters and the deadline. Its process also prevents transfers that the rule does not permit.
Eligible businesses still using the old initial identification framework cannot combine it with the new domestic delay provisions. The applicable transition arrangements need separate examination.
Sources: Federal Register of Legislation: Section 6-12; Federal Register of Legislation: Section 29; AUSTRAC: Ongoing CDD and other CDD reforms.