How to Comply with KYC Requirements During the COVID-19 Pandemic | InterPrac

How to Comply with KYC Requirements During the COVID-19 Pandemic

Media Release - www.austrac.gov.au/business - COVID 19 Updates - 01 April 2020

How to comply with KYC requirements during the COVID-19 pandemic

The COVID-19 pandemic is posing challenges for Australians and Australian businesses, particularly during this period of social distancing, self-isolation and other disruptions to everyday business.

We recognise this may pose additional challenges for how you comply with your customer verification obligations under the anti-money laundering and counter-terrorism financing (AML/CTF) regime during this disruptive period.

As the AML/CTF regulator, AUSTRAC will work constructively with you as you manage your money laundering and terrorism financing risks during this disruptive period. This includes considering your circumstances when applying the AML/CTF laws.

Alternative processes to verify customer identity

While many reporting entities rely on electronic verification, others use face-to-face or documentation based procedures. As Australia responds to the COVID-19 pandemic, we recognise that some ‘know your customer’ processes cannot be used.

The AML/CTF Rules support flexible KYC processes and procedures. Other ways that you can verify your customers’ identity and fulfil your KYC requirements include:

  • using alternative proof of identity processes (Rule 4.15.1)
  • using electronic copies (scans or photographs) of reliable and independent documentation, in accordance with your AML/CTF program, to verify the identity of individual customers (Rule 4.9.3(3)) or companies (Rule 4.9.5(3))
  • relying on disclosure certificates to verify certain types of information about customers who are not individuals, where measures put in place by industry as part of their response to the COVID-19 pandemic mean that such information is not otherwise reasonably available from other sources (Rules 4.3.12, 4.4.16, 4.5.8, 4.6.8 and 4.7.8)

If you choose to verify a customer’s identity using these options, you should still apply the risk-based systems and controls in your AML/CTF program.

After customers have provided copies of identification documents, you could consider additional verification through:

  • using a video call, such as Skype, Zoom or FaceTime to compare the physical identity of a customer with scanned or photographed copies of identification documents
  • requiring a customer to provide a clear, front-view ‘selfie’ of themselves that can be compared with the scanned or photographed copies of identification documents
  • telephoning the customer to ask questions about their identification, their reason for requesting a designated service or other questions that would assist in ascertaining whether the customer is who they claim to be.

Reporting entities may wish to advise the customer of such additional systems and controls prior to the provision of scanned copies, to prevent attempts by criminals to use false names or identification

AUSTRAC recognises that a reporting entity may consider that it needs to amend its AML/CTF program to implement alternative processes to verify customers’ identity, but faces challenges in making formal amendments during this period.  In these circumstances, we expect that you keep a record of any changes in policies and procedures made due to the COVID-19 pandemic.

Importance of reporting during the COVID-19 pandemic

It’s important to exercise vigilance in the current environment in response to the changed risk environment for criminal activity, including fraud and identity theft. High-quality, accurate and timely suspicious matter reports give AUSTRAC and our partner agencies the best chance to detect, deter and disrupt criminal activity. Find out more about monitoring for new and emerging threats and submitting suspicious matter reports (SMRs) during the COVID-19 pandemic.

Following are two practical examples of how you might apply flexible KYC processes in your business.

Example 1: Opening a new account while a customer is in self-isolation

Business A receives a request from Jane to open an account. However, Jane advises that she is currently in self-isolation because of COVID-19.

Until recently, Business A required customers to verify their identity face-to-face and show their original documentation. However, Business A has recently updated their AML/CTF program and processes to allow a more flexible approach when managing situations arising from the COVID-19 pandemic.

Business A advises Jane that they have a new process to provide services to customers which may involve follow up telephone calls, use of ‘selfies’ and/or video calls to verify identity. Business A asks Jane to complete an account opening form and provide a photograph of two primary identification documents. Jane takes a photograph of her driver licence and passport and sends them in an email to Business A with the form.

Business A reviews Jane’s application and documents and a representative arranges a video call to complete identity checks. During the video call, the representative from Business A asks Jane about her identification, the reasons she is opening the account, and about her financial history. On the call, Jane shows Business A her driver licence and passport clearly on screen, so these can be checked against the copies submitted in her application.

Business A is satisfied of Jane’s identify and that she is person referred to in the original documents and the person on the video call. Business A decides to open an account for Jane. Business A makes a written record of the call made to Jane.

Example 2: Unable to verify a customer’s identity

Business B recently updated its KYC collection and verification processes to allow more flexibility in verifying a customer’s identity as a result of the COVID-19 pandemic.

John contacted Business B and asked to open a new account. As required by Business B, he submitted a scanned copy of his driver licence and Medicare card by email.

Business B started its verification process through a video call with John. At the start of the call, the representative noticed that the person on the call did not match the photo on the driver licence. The Business B representative asked to speak with John, and the person on the video call said that they were John. The Business B representative asked John to hold up their driver licence to display on the video call, however John advised that he couldn’t do that at this time.

The Business B representative offered to reschedule the call for a more convenient time which they arranged however when subsequent calls were made, Business B was not able to make contact with John.

Business B made a written record of the calls and attempted follow ups with John.

Business B did not proceed to opening the account and lodged a suspicious matter report to AUSTRAC, as they suspected this was potentially related to fraud or identity theft.

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