Two arrangements have different effects
A business can use a supplier to perform an identity-checking task. That is not automatically statutory reliance on another reporting entity's CDD. AUSTRAC distinguishes the arrangements because the conditions and consequences differ. The commercial word partner does not determine which arrangement exists.
Reliance can involve an ongoing agreement or a case-by-case decision with a qualifying regulated party. Outsourcing can involve a service provider that is not a reporting entity. In an outsourcing arrangement, the business remains liable for breaches of CDD and record-keeping obligations. Read the actual arrangement rather than relying on its marketing description.
- Define the external work
Identify the information or task provided.
- Examine the legal mechanism
Distinguish outsourced tasks from statutory reliance.
- Examine eligibility and risk
For reliance, assess the qualifying party and relevant conditions.
- Examine evidence and responsibilities
Identify what the material establishes and what remains your work.
Identify the external CDD arrangement
First examine whether the third party qualifies for statutory CDD reliance. A yes answer does not establish that all reliance conditions are met. Outsourcing tasks does not transfer your CDD or record-keeping responsibility.
Qualifying regulated third party? No: No statutory reliance. Consider outsourced tasks. Yes: Examine reliance conditions and risk
Identify what is being relied on
AUSTRAC's reliance guidance identifies conditions concerning the third party, its regulation and whether reliance suits the risks faced. It also addresses policies and evidence supporting the decision. These requirements go beyond receiving a file marked KYC complete.
The business needs to understand what information was collected, what was verified and whether the material supports its own applicable requirements. This page does not reproduce all statutory agreement terms or make a determination about a foreign regime. It explains why a supplier's identity result and a qualifying reliance arrangement should not be treated as equivalent inputs.
Invented example: a verification report
A fictional business receives an electronic identity report from a technology supplier. The report may support the business's verification work. The report alone does not establish a statutory reliance arrangement. It may leave initial CDD matters unanswered, including beneficial ownership and the purpose of the service.
Compare that with information received under a properly assessed arrangement with a qualifying regulated entity. The legal basis and conditions need examination. This example does not approve either arrangement. It shows why the file should state which mechanism is being used and what work the business still needs to perform.
- Outsourced task
A supplier performs work for the reporting entity.
- Statutory reliance
A different route with specified legal conditions and limits.
- Remaining work
Identify what remains with the reporting entity under the route actually used.
Ask what the provider actually supplies
Read this visual with the source conditions and explanation in this section.
Separate evidence questions. An answer to one does not settle the others.
Ask for evidence, not a label
Ask the process owner to explain the legal basis, the task covered and access to supporting material. Ask what happens if the information is inadequate. A contract title alone cannot answer these questions. Keep the answers aligned with the current law and the actual operating process.
Avoid assuming that another professional involved in the same transaction has completed all checks you require. Equally, do not duplicate work without considering whether a lawful reliance route is available. The aim is to use an appropriate arrangement with clear responsibilities and evidence, not to treat all external help as either forbidden or sufficient.