AUSTRAC expects reporting entities to complete applicable customer identification procedures before providing designated services, and where a client refuses to provide required identification, the service should not proceed. AFS licensees must document the refusal, assess ML/TF risk, and consider whether a suspicious matter report is required.
Expanded Answer
AUSTRAC’s position is that customer identification and verification are foundational AML/CTF obligations. If a reporting entity cannot complete identification procedures, it must not provide the designated service. This applies regardless of commercial pressure or client relationship considerations. The obligation is risk-based, but minimum identification requirements must still be met.
In practice, advisers must clearly document what identification was requested, what was provided, and the nature of the refusal. The adviser or licensee should assess whether the refusal increases the risk of money laundering or terrorism financing and determine whether escalation is required. This may include internal reporting and consideration of a suspicious matter report to AUSTRAC.
Regulatory scrutiny increases where firms proceed with advice or transactions despite incomplete identification, or where refusals are not documented and assessed. Practical AML/CTF expectations are outlined in AML/CTF financial planners Australia and Five AML questions you must be able to answer.
Why it matters
Failing to complete customer identification exposes firms to significant AUSTRAC enforcement risk, including civil penalties. It also increases exposure to financial crime and reputational damage.
Practical guidance
– Refuse to provide the designated service until required identification is obtained in accordance with the AML/CTF program
– Document the identification request, the client’s refusal, and the associated risk assessment
– Escalate the matter internally and assess whether a suspicious matter report should be lodged
Further reading
Why AML programs fail adviser audits