Lee Bailie

09 August 2018

Tranche 2 of the AML/CTF Act 2006, will challenge the Australian “she’ll be right” mentality as gatekeepers of all sizes will come under greater scrutiny by the regulator and self-compliance processes will need to meet greater regulatory requirements.

An industry that is worth US$250Bn and growing by US$50BN each year internationally, many overseas markets such as the UK are significantly more advanced in their AML technology and use, where for example the use of Verification of Identity (VOI) is growing 300% year on year.

What we can learn from more mature markets is that we need three things in our solutions: they need to be fast, effective and most importantly sustainable.

Faster onboarding of clients will greatly mitigate risk at the onboarding stage and manage all compliance requirements from the very beginning of the relationship.

Secondly, we need to step up the effectiveness and thoroughness of our KYC processes in a simple and manageable way. As the industry grows more comprehensive VOI systems such as Document Verification Service that will verify official documents against the Government’s system and facial biometrics technology that can check images exactly against official identification images will wholly reduce the risk of fraud at the onboarding stage.

However, and most importantly onboarding checks and the monitoring and reporting integral to the KYC process needs to be sustainable if they are to work. A fast and thorough process can’t be implanted at the expense of cost, especially for smaller practitioners handling smaller transactions.

It is vital that the regulatory requirements are aligned with different types of business requirements, users and transactions, not a one-size fits all approach that requires the same investment and process from a large accounting firm and an individual conveyancer.

The wide range of professionals that will need to adhere to Tranche 2 is challenging. Smaller practitioners have less time, budget and ability to engage with a complex KYC process and less reason when that settling an individual property is very different to transacting multi-million-dollar deals in terms of searches and identifying beneficial ownership.

If the requirements are too costly in terms of resources, non-compliance could be a real issue for smaller organisations and the whole industry.

Once the process is established, gatekeepers will want to self-serve their compliance and search and monitor this information themselves rather than engaging their legal consultants for every transaction and new client. We’ll see this increase as the speed of transition in the legal and professional services industry speeds up.

Therefore, the regulator, industry and third-party suppliers need to work together to ensure fast, effective and sustainable KYC requirements and solutions are created to allow easy compliance across all gatekeepers.

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