Australia expands AML rules, widening market for digital identity verification

Changes to Australia’s Privacy Act and money laundering rules have put small businesses at risk of fines and other regulatory action and made digital identity verification a prominent compliance requirement.

As of July 1, more than 100,000 small businesses must meet the new reporting and data obligations under changes to the anti-money laundering and counter terrorism financing (AML/CTF) frameworks. The AML and CTF Amendment Bill “strips privacy law exemptions from SMEs in relation to certain types of financial reporting” and requires companies to “take a risk-based view of their customers.”

The move represents Australia’s largest AML/CTF reform in nearly two decades.

The new outcomes-based, risk-driven model expands the scope of collection and tightens verification, explicitly requiring both for more roles across more sectors. Realtors, lawyers, accountants, conveyancers and dealers of precious stones and metals are now considered “tranche two” under the reforms, which eliminate a $3 million (about US$2 million) annual turnover exemption for small and medium sized enterprises.

Noncompliance can trigger escalating civil penalties based on the severity of the breach; in the most severe cases, executives could face criminal liability.

That said, Privacy Commissioner Carly Kind has promised to give “consideration” to non-compliant firms as they adjust to the new rules. “In all the circumstances we’ll consider what an entity is required to do and how much change they’re going through,” Kind says. “The larger an entity is and the more resources they have available to them, the more likely we would be to take enforcement action sooner after the obligations come into effect.”

InnovationAus quotes Rick Iversen, head of digital ID exchange provider ConnectID, who views the changes as an opportunity for businesses to shrink their customers’ data footprint using digital ID.

“There’s a really strong use case for digital ID solutions to prove who you are without having to hand over driver’s licences, do selfies and document verification services checks and leaving your biometrics with a rental agency,” Iversen says. “I think a long term win will be widespread use of digital ID” and “minimizing the amount of data people have to share.”

Australian regulators remain locked in a high-profile battle with massive social media platforms – among the world’s largest companies. Their size and wealth has made enforcement a challenge, as they push back against efforts to impose age assurance requirements and limit the amount of extreme content on their platforms.

The AML/CTF law is not as controversial. But regulators are still facing calls from industry for a 12-month delay before the law takes effect, and a 24-month “transitional compliance period.”

“Despite the best efforts of the profession and significant work by the regulator, a lack of clarity in the legislation means it is still not clear what legal services are caught up in the regime,” says Law Council of Australia president Tania Wolff. “Until clarity is provided on who the regime actually applies to, commencement should be delayed.”

Biometric identity verification providers are ready now. Entrust recently integrated Australia’s Document Verification Service (DVS) directly into its IDV workflow. Harvinder Singh, Entrust’s regional vice president of identity security solutions, says the regulatory reform means changing how organizations think about trust. “By treating identity verification as the first moment of truth in onboarding,” he says, “organizations can prevent fraud early and protect the digital experiences customers rely on.”

Article Topics

AML  |  Australia  |  biometrics  |  connectID  |  digital ID  |  identity verification  |  legislation