New REIA draft guidance explains how agents may use delayed customer due diligence and rely on another reporting entity during a property transaction.

These options could reduce duplicated identity checks, particularly when agents and conveyancers need similar information. However, they do not transfer responsibility for compliance away from the agency.

Three points require particular attention.

1.     Delayed CDD has firm deadlines

A selling agent may delay completing CDD on a buyer or transferee. A buyer’s agent may similarly delay CDD on a seller or transferor.

The outstanding CDD must be completed by the earlier of:

  • 28 days after contracts are exchanged
  • Three days before the initially agreed settlement date

This means members will need systems that identify the applicable deadline and escalate incomplete checks well before it arrives.

2.     Reliance must be formally documented

An agent may be able to rely on CDD completed by another reporting entity involved in the transaction, such as another agent, conveyancer or legal practitioner.

This cannot be based on an assumption that the other party has completed the necessary checks. A documented arrangement must identify responsibilities and enable the agency to obtain the relevant KYC information and verification data within the required timeframe.

The agency must still assess the customer’s money laundering and terrorism financing risk, review the information received and decide whether further CDD or enhanced due diligence is required.

3. Non-cooperation requires careful escalation

A limited deemed-compliance pathway may be available when a non-client party does not cooperate, but it is not an automatic exemption from CDD.

The agency must be able to demonstrate that it took all reasonable steps to obtain the information. It must record its attempts, any refusal or failure to respond, changes to the customer’s risk profile and its consideration of whether a suspicious matter report may be required.

If another reporting entity cannot or will not provide the information, the agency may need to obtain it directly from the customer.

What principals should do now

Principals should begin preparing procedures that:

  • Determine when the agency will complete CDD directly and when reliance may be appropriate
  • Track the 28-day and three-day deadlines
  • Document reliance arrangements and record-keeping responsibilities
  • Provide secure methods for transferring and storing KYC information
  • Escalate missing information, non-cooperation and suspicious circumstances
  • Train sales teams not to treat delayed CDD as an open-ended extension

The REIA document remains consultation guidance, so procedures may need to be updated when the final guidance is issued. We’ll keep you informed.