People experiencing vulnerability can face extra problems in accessing financial services
AUSTRAC recently updated its guidance related to customer due diligence, allowing companies to better support vulnerable clients. AUSTRAC suggests that companies should apply a flexible, risk-based, framework, assessing factors such as a customer’s ML/TF risk, the type of transactions and the impact of any vulnerabilities.
Some clients face barriers in meeting standard customer identification (KYC) requirements due to various vulnerabilities. The Australian financial services industry codes adopt a definition of a vulnerable consumer as an individual who is especially susceptible to detriment. Their circumstances may prevent them from accessing required documents, or their documentation may have inconsistent personal information. Such vulnerabilities may include, but are not limited to, the client experiencing domestic or personal violence, being affected by a natural disaster, periods of homelessness or imprisonment, being a refugee, being intersex, transgender or gender diverse, living in a remote area, or experiencing health or age-related constraints.
Financial services providers are under an expectation to support vulnerable customers under the Customer Owned Banking Code of Practice (COBCOP) and the Banking Code of Practice (BCOP). These Codes are binding on member banks; regardless, the Australian Financial Complaints Authority (AFCA) has set this as the standard of good industry practice.
To better support these customers, AUSTRAC outlines some alternative identification processes.
Reporting entities must be careful to only offer these alternatives to customers that have a low ML/TF risk profile, as otherwise this flexibility could compromise safety. Alternative identification processes can be tailored to the individual and their circumstances. For example, for customers unable to lodge documents in-person, businesses could accept them by email, certified mail or facsimile, or request a photograph of the customer holding their documents. Financial institutions could also accept alternate forms of documentation where necessary, such as referee documents, government correspondence, a community organisation membership card, or a customer’s statement of identity (as a last resort).
The need to support vulnerable customers must be balanced with every financial institution’s mandate of promoting safety by preventing money laundering and terrorism financing. Reporting entities should align alternative processes with their risk-based systems and controls already embedded as part of their AML/CTF programs. For new documentation types, reporting entities must create standardised protocols so all company personnel know how to respond and the response is consistent.
Most businesses will have in place processes where unusual cases are passed on by front-line staff to an expert group within the business for decision and ongoing management. Cases where a customer experiencing vulnerability needs to progress through alternative KYC criteria will fall under this process.
The new AUSTRAC guidance reflects a growing impetus within the industry to support vulnerable customers and ensure they are not locked out of accessing financial services.
AUSTRAC’s guidance is here
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