As the sixth-largest country in the world with a resilient, well-regulated economy, Australia continues to attract investors and entrepreneurs. The country enjoys a strong reputation for innovation and robust governance, making it an appealing destination for global business expansion.
Australia’s economy is poised for growth across all sectors, with the service industry leading the charge. The country’s fintech sector, valued at approximately $45 billion, is thriving alongside key industries such as healthcare, e-commerce, education, renewable energy, and information technology.
Given these dynamics, it’s no surprise that Australia ranks 16th globally for direct foreign investment and 14th on the World Bank’s Ease of Doing Business scale. For businesses looking to expand globally, Australia offers a wealth of opportunities.
However, businesses operating in Australia, especially those offering financial, digital currency exchange, remittance, bullion, or gambling services, must adhere to strict regulations enforced by AUSTRAC, the country’s anti-money laundering and counter-terrorism financing (AML/CTF) regulator. Non-compliance can lead to significant penalties, including hefty fines and license suspensions. Identity verification is a critical component of this compliance. Here’s what you need to know.
Identity Verification in Australia
All businesses regulated by AUSTRAC must implement stringent customer identification procedures. These Know Your Customer (KYC) processes must be documented in Part B of the company’s AML/CTF program.
Additionally, legislation such as the Notifiable Data Breaches (NDB) scheme under the Australian Privacy Act mandates rigorous identity verification measures. These high compliance standards are driving the growth of the Australian Identity Verification Market, projected to expand at a CAGR of 5% from 2024 to 2030.
To verify a customer’s identity, organizations must obtain the individual’s full name and either their date of birth or address. Verification can be based on electronic data or physical documentation. Acceptable documents for identity verification in Australia include:
- Passports, driver’s licenses, or any other identity document with a photograph
- Birth certificates
- Notifications from an Australian government agency
Before providing any service, businesses must ensure the customer is who they claim to be. Depending on the risk level associated with the customer, additional due diligence may be required. Customer identification procedures must consider factors such as:
- The nature and size of the business
- The type of customer
- The purpose of the customer relationship
- The type of money laundering risk that may be encountered
- The customer’s source of funds
- The types of services provided
- How the services are delivered
Australia’s Digital ID System
To simplify identity verification for businesses and consumers, Australia introduced a digital ID system. While this system is voluntary, it can be used to verify identities online for personal, educational, and business purposes. Although digital IDs do not replace physical identity documents, they allow for online verification without needing traditional forms of ID.
For businesses, using digital IDs reduces the number of documents that must be collected from customers and minimizes the amount of data stored, thereby lowering the risk of data theft and enhancing data privacy.
A New Form of Digital ID
In an effort to enhance the existing digital ID system, the Australian government is working on a new digital ID verification system that will give citizens greater control over their data. This new system may be completed through the myGov digital wallet on mobile phones, storing personal details such as date of birth, address, visa status, qualifications, and occupational licenses. The platform will transfer the required information for KYC checks via digital tokens.
This new digital ID system is expected to be piloted in early 2025, though details are still under development.
Penalties for Non-Compliance
Failing to establish a robust identity verification system can expose companies to penalties for non-compliance with Australia’s KYC and AML regulations. Companies may be fined up to 100,000 penalty units, with the value of each unit determined by the date of the offence. For instance, in July 2023, Crown Melbourne and Crown Perth were fined $450 million for non-compliance with the AML/CTF Act.
Beyond financial penalties, AUSTRAC may appoint external auditors to review a company’s AML/CTF compliance strategy and conduct a money laundering/terrorism financing risk assessment. Infringement notices may also be issued and made public, damaging the company’s reputation and customer trust.
In extreme cases, AUSTRAC may suspend, cancel, or refuse to renew a business’s registration, making it illegal to operate as a digital currency exchange provider or remittance service provider in Australia.
Identity Verification for Businesses Expanding to Australia
Although Australia’s Digital ID system has been in place since 2009, it remains a voluntary program. A significant portion of the Australian population still relies on traditional forms of identity verification. Therefore, businesses catering to this audience must implement stringent identity verification systems.
Automated identity verification tools can be highly effective in this context. These tools automatically read and verify data entered into forms or from identity documents against reliable third-party databases, ensuring accuracy and compliance with Australian regulations.
Some advanced identity verification tools also offer features like liveness checks, where customers are required to take a selfie with their ID document. Facial biometrics can then be used to verify that the individual in the selfie matches the person in the ID document.
There are numerous identity verification tools available today that are user-friendly and easily integrated with other systems and applications. To ensure compliance with Australian regulations, it’s crucial to select a tool that can access relevant Australian databases for customer identity verification.
Even when not mandatory, incorporating identity verification into your operational workflow is a wise investment. Regardless of the services you offer, investing in identity verification in Australia can yield significant rewards, including reduced fraud risk and enhanced brand reputation.
Secure Your Business with Melissa's Identity Verification Solutions – Book Your Free Demo Today!
Our cutting-edge Identity Verification Solutions ensure seamless onboarding of customers, merchants, partners, and employees while keeping your business compliant. Discover how we can protect your business—book a free demo now to experience the benefits firsthand.