Carrying out applicable customer identification after commencing to open a bank account

If a service or an activity cannot be undertaken without opening an account and allowing a deposit, a delay in completing ACIP will likely be essential to avoid interrupting the ordinary course of business. This may be due to the nature of the service or the activity, or the type of customer involved.  

Examples may include:

• Customers who open an account remotely or online and are unable, on reasonable grounds, to be verified at the time using electronic data.  
• Visa applicants who are required to open an Australian bank account and deposit a specified amount of funds as part of the application process, where ACIP cannot reasonably be completed until the visa is granted.
• Customers in an emergency situation, such as those who are experiencing or have experienced family and domestic violence or customers affected by a natural disaster (for example, fires or floods), who need to open an account but don’t have access to documents to complete ACIP.
• Aboriginal and Torres Strait Islander customers who cannot provide the identity documents you would usually rely on for ACIP and where a flexible approach is required having regards to their personal, social and cultural circumstances.
  • Note: Alternative identity proofing processes may be also be applicable in the two circumstances set out above as specified under Chapter 4 of the AML/CTF Rules. Read more about Identifying customers who don’t have conventional forms of ID.
• Time-critical services where, for example, for commercial reasons it is necessary to lock in a foreign currency exchange rate, interest rate or other rapidly fluctuating aspect of the service on the day the account was opened.

There may be other circumstances when you determine, on reasonable grounds, that completing ACIP on a customer after opening an account and allowing deposits to be made is essential to avoid interrupting the ordinary course of business.

Making a decision on whether to open an account before completing ACIP

You must determine on reasonable grounds that the circumstances set out in Chapter 79 AML/CTF Rules apply.

This means applying an objective test, taking into account a number of factors, above and beyond the convenience of opening the account.

You should consider all the relevant circumstances. Such circumstances could include, but are not limited to the following matters as outlined in your AML/CTF program:

• the nature and characteristics of the customer involved
• the service or activity in relation to the customer that would be affected or interrupted if the designated services cannot be provided before ACIP is completed
• the purpose of the account being opened
• the economic or business rationale for opening the account in these circumstances
• ensuring there is low additional risk of ML/TF arising from the provision of the designated services before ACIP is completed.

Your AML/CTF program may also determine that circumstances justify delaying ACIP for a class or group of customers, scenarios or products. This must be subject to identifying any higher-risk factors on a case-by-case basis.

For example, you may determine that delayed ACIP is appropriate for all applicants for a particular Australian visa category (because opening an Australian bank account and depositing a specified amount of funds is a requirement common to all applicants for that visa).

This should always be subject to identification of any higher risk factors that mean that ML/TF risks of delayed ACIP cannot be effectively mitigated, on a case-by-case basis, despite the customer, scenario or product falling within a class for which you would generally carry out the ACIP after opening the account and allowing a deposit.

Applying the risk-based approach

Your AML/CTF program must include appropriate risk-based systems and controls to govern and decide when you will allow a customer to open an account and make an initial deposit before ACIP is completed.

Customer due diligence involves more than verifying the identity of a customer. As detailed in your AML/CTF program, you must collect and assess all relevant information in order to ensure that you:

• know your customers, including persons purporting to act on their behalf and any beneficial owners, where applicable
• understand the nature and purposes of the business relationship, so you know what you should expect from doing business with the customer
• remain alert to any potential ML/TF risks arising from the relationship, so these risks can be identified and mitigated.

For more information, refer to Customer identification and due diligence overview.

When opening an account before completing ACIP, your risk-based systems and controls must account for the overall ML/TF risks occurring, including where the ACIP is not or cannot be completed and the initial deposit is returned. For example, as part of your risk management strategies, you may wish to consider:

• limiting the number and types of customers, products or services offered under this arrangement
• specifying how the customer makes the deposit. For example, a transfer from another account held in the customer’s name with another financial institution or a personal cheque drawn on another financial institution, rather than a cash deposit or a bank cheque or draft.

Additional risk management

As part of the risk-based approach to mitigating your potential ML/TF risks, where ACIP is unable to be completed during the establishment of a business relationship, some of the processes you can consider include:

• Specifying in your policies and procedures a defined timeframe in which ACIP must be completed. This will help to:
  • avoid situations where the completion of ACIP remains outstanding
  • minimise the risk of being unable to contact the customer or return the funds to the original source, if you need to discontinue the business relationship.
• Implementing processes that ensure you can return funds directly to their source, for example, where:
  • the customer has failed to complete your on-boarding requirements in accordance with your AML/CTF program requirements, such as not having a reasonable excuse for failing to complete ACIP with an agreed time limit
  • you determine that the customer is outside your risk appetite
  • you are not satisfied about the customer’s true identity or you suspect the customer is using fraudulent identification documents.
• Mitigating the risk that the customer could use the account as evidence of identity with another reporting entity or other service providers, for example by withholding or clearly marking any statements issued to the customer as relating to an unverified account.
• Determining on the evidence available if the customer poses an unacceptable level of ML/TF risk.

If you decide to return the initial deposit to the customer because the ACIP cannot be completed within a reasonable period, be careful when determining the method for making the refund to avoid converting or legitimising funds that may otherwise be suspicious. A payment of cash or by way of a bank cheque should be avoided, if possible, and electronic deposits should be returned to the originating account.

You must consider whether there are grounds for suspicion and submit a suspicious matter report in circumstances where you are:

• unable to get cooperation from the customer to complete the ACIP within a reasonable period after the opening of an account and/or the making of an initial deposit in relation to the account, and
• there is no logical explanation for the delay.

Carrying out the ACIP as soon as reasonably practicable

If you delay the completion of ACIP until after the account is opened and/or a deposit is made in relation to the account, you must complete it as soon as reasonably practicable.

What is ‘reasonably practical’ should be an objective assessment based on the facts.

Waiting until the customer decides to carry out another transaction is generally not appropriate as there may be a long gap between the account opening or initial deposit, and the next transaction. You must be able to demonstrate that you have taken reasonable steps to complete the ACIP at the earliest possible time. This could include:

• contacting customers who open an account remotely or online within one business day, where you are unable to verify ACIP using electronic data
• contacting Australian visa holder customers when you become aware they have arrived in Australia, to make arrangements to complete the ACIP
• starting alternative customer identification processes immediately following opening an account for customers who don’t have conventional forms of ID, which may include customers in emergency situations and Aboriginal and Torres Strait Islander customers who cannot provide the identity documents you would usually rely on for ACIP
• contacting customers within one business day of opening an account for a time critical service.

Related pages

• Customer identification and due diligence overview
• Preventing financial crime using a risk-based approach

Related legislation

• Sections 5, 32 and 34 of the AML/CTF Act
• Chapter 79 of the AML/CTF Rules