1️⃣ What is client identification?
Client identification is the process of collecting a customer’s details before providing a designated service. This includes:
Full name
Date of birth (for individuals)
Residential or business address
Company name and ACN/ABN (for entities)
Nature of the business relationship
This step is required under AUSTRAC’s Know Your Customer (KYC) obligations.
2️⃣ What is client verification?
Client verification is the process of confirming that the collected identification details are real and legitimate by cross-checking them against independent and reliable sources.
Verification methods include:
Electronic Identity Verification (EIV) (e.g., government databases, credit bureaus)
Official documents (e.g., passport, driver’s license, utility bills)
Biometric verification (e.g., facial recognition)
Source of funds/wealth verification (for high-risk customers)
Verification ensures that the client is who they claim to be and helps prevent fraud, money laundering, and terrorist financing.
3️⃣ What is the difference between client identification and client verification?
Feature | Client Identification | Client Verification |
What it does | Collects identity details | Confirms those details are valid |
Data required | Name, DOB, address, business details | Validated data from independent sources |
How it’s done | Customer provides information | Cross-checked against trusted sources |
Regulatory role | First step of CDD | Ensures compliance with KYC |
Safe Harbour Rule | Identification alone is not sufficient | Must use two independent data sources |
4️⃣ What is AUSTRAC’s Safe Harbour rule for verification?
AUSTRAC’s Safe Harbour rule (Rule 4.9.3) allows businesses to verify an individual’s identity by using:
✔ Two independent and reliable data sources, or
✔ A combination of official documents and data sources
This method ensures AML/CTF compliance and reduces regulatory risk.
Safe Harbour does not require a PEP check, but businesses often include it as part of their risk assessment.
5️⃣ What are Politically Exposed Persons (PEPs)?
PEPs are individuals who hold prominent public positions or roles in government bodies or international organizations, both domestically and internationally. Due to their positions, PEPs may be more susceptible to corruption and bribery, posing higher risks for money laundering and terrorism financing.
6️⃣ What are AUSTRAC’s requirements for PEP checks?
AUSTRAC requires businesses to:
✅ Identify whether a customer or beneficial owner is a PEP before providing services (or as soon as practicable afterward).
✅ Apply enhanced due diligence (EDD) for PEPs to mitigate risks, including additional background checks and transaction monitoring.
✅ Keep records of PEP identification and ongoing risk assessments.
Detailed information on PEP checks is available in AUSTRAC’s PEP guidance:
🔗 Politically Exposed Persons (PEPs) – AUSTRAC
7️⃣ Does AUSTRAC’s Safe Harbour require a PEP check?
No, Safe Harbour verification does not mandate a PEP check. However, financial institutions and regulated entities often include PEP screening as a best practice in their risk-based AML programs.
If a person is identified as a PEP, enhanced due diligence (EDD) is required before proceeding with the business relationship.
8️⃣ What should businesses do if a PEP is identified?
If a customer is flagged as a PEP, AUSTRAC recommends:
✔ Conducting a risk assessment based on their political exposure and transaction history.
✔ Applying enhanced due diligence (EDD), including verifying source of funds/wealth.
✔ Monitoring transactions for any unusual or suspicious activity.
✔ Reporting suspicious matters to AUSTRAC if necessary.
More details can be found in AUSTRAC’s PEP Quick Guide:
🔗 AUSTRAC PEP Quick Guide (PDF)
9️⃣ How does Tranche 2 impact lawyers, accountants, and real estate agents?
Under Tranche 2 AML/CTF reforms, these professionals will be required to:
Conduct both client identification and verification before providing services.
Implement risk-based due diligence measures, including PEP and sanctions checks.
Comply with AUSTRAC reporting requirements for suspicious transactions.
For full AUSTRAC guidance on Customer Identification and Verification, visit:
🔗 AUSTRAC CDD Rules
🔹 Need Further Guidance?
📩 Email: support@realaml.com
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For the latest AUSTRAC updates, visit: www.austrac.gov.au