Who are you dealing with?

February 8th, 2019

As a broker, you are on the front line when it comes to preventing crimes like money laundering. It’s often the case that crimes like these are seen by the customer as nothing more serious than ‘little white lies’ – but the consequences can be very serious for you if you get it wrong!

Customer Due Diligence (CDD) is an important part of your responsibilities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated rules. This regime in Australia requires us to know who we are dealing with on a day to day basis. The concept of Know Your Customer (KYC) has been around for many years and is based on conducting reasonable due diligence to ensure that you know who you are doing business with.

How does this affect you?

As an ACL holder or a Credit Representative, you have obligations under the legislation to adequately identify your customers when they apply for a loan or lease.

Customer due diligence requirements include:

• Collecting and verifying customer identification information
• Identifying and verifying the beneficial owners of a customer (for non-individual customers)
• Identifying whether a customer is a Politically Exposed Person (PEP) or an associate, and taking steps to establish the source of funds used during the business relationship or transaction
• Obtaining information on the purpose and intended nature of the business relationship.

What is the biggest challenge for brokers?

The biggest issue brokers face is the possibility of money laundering. Using undeclared income to purchase a car, truck or even business equipment, may potentially constitute money laundering.

A person does not necessarily need to be a big time criminal to commit this crime! That’s why it is important that you confirm your customer’s identity, verify their income and establish the source of any deposit funds for every loan or lease.

What do you need to do?

There are some simple steps to follow in the customer due diligence process which will assist you and ensure that your obligations are being met:

• Identify your customer – check all identification provided against the original documents (Drivers Licence, Passport, Medicare Card etc)
• Confirm where large amounts of money have come from.
• Review your client data base periodically. Contact your customers to update their information.
• Cross check the information you have received with reliable sources – internet, white pages, business listings (ABN) etc
• Ensure the information you provide to the lender is up to date, accurate and verifiable.
• Make adequate enquiries of the customer every time – don’t allow them to rush you through the process.
• Take all reasonable steps to verify the information provided to support the transaction.
• Consider whether a customer might be deemed high risk. An example might be if they have an unusually lavish lifestyle contrary to their stated income. Another sign might be if they become particularly evasive when questioned around their income or source of funds.

The requirement that some lenders impose to meet face-to-face with customers is strongly linked to the Anti-Money Laundering (AML) and Counter Terrorism (CTF) legislation and plays an important part in the Customer Due Diligence process.

At Connective Asset Finance we recognise that there will be circumstances where meeting your customer face to face is not easy. In these situations, it’s important to put controls in place to mitigate risk and to do what is reasonable.

Where can you get more information?

The Australian Transaction Reports and Analysis Centre (AUSTRAC) are Australia’s AML/CTF regulator and their website contains invaluable information relating to the AML/CTF Rules, Customer Due Diligence and what your obligations are. You can visit their website here. If you are a Connective broker, simply click your help icon in Mercury to get in touch with the Compliance Team if you have any questions.

Not a Connective Asset Finance broker yet?

What are you waiting for? Simply fill out the form on this page to talk with your local Connective Broker Support Manager. Alternatively, contact your local Connective Asset Finance BDM using the details below.

Steve Light

Connective Asset Finance BDM for VIC/SA/WA Phone: 0499 399 433 or email light@connective.com.au

Phillip Meehan

Connective Asset Finance BDM for NSW/QLD Phone: 0488 788 839 or email meehan@connective.com.au