VOI vs KYC: Everything you need to know for Tranche 2 reforms

I conduct VOI so I'm already compliant with AML, correct?

In a word, no.

While VOI (verification of identity) and KYC (Know Your Customer) share some similarities, VOI is specific to property transactions and is narrower in scope than AML requirements. AML rules use a risk-based approach and are more flexible in what is considered acceptable for identification and verification.

Simply conducting VOI checks does not meet the broader obligations under AML regulations. In this article, we explain the similarities and differences.

What is VOI?

VOI, or Verification of Identity, is a process carried out by conveyancers to confirm that an individual involved in a property transaction is who they claim to be. The regulations aim to reduce the risk of identity theft and property fraud in Australia.

As part of this process, conveyancers must take reasonable steps to gather and verify the individual's identity, often by meeting in person and collecting identity documents like passports and driver licenses. The requirements for VOI are outlined in the Model Operating Requirements and Model Participation Rules set by the Australian Registrars' National E-Conveyancing Council (ARNECC).

Who do I need to verify for VOI checks?

The VOI guidance requires a conveyancer to verify the identity of the following individuals:

• Client 
• Mortgagors
• Persons to whom certificates of title are provided
• Signers
• Subscribers Administrators 
• Users who are not signers or Subscriber Administrators

In short, conveyancers should conduct VOI checks on their clients, mortgagors and any individual who can sign documents on behalf of the client or mortgagors.

What is Customer Identification and KYC?

Customer identification and Know Your Customer (KYC) are key elements of Australia's Anti-Money Laundering (AML) rules (division 2, section 28). KYC ensures that financial institutions verify the identity of their customers and the beneficial owners of corporate clients. This helps prevent financial crimes like money laundering and terrorism financing.

KYC involves collecting and verifying customer information such as full name, date of birth, and address for individuals, and legal documents such as company extracts for entities.

At the moment, conveyancers and legal firms are not yet required to comply with KYC under Australian law until the implementation of Tranche 2 reforms.

Is VOI the same as KYC? What are the differences?

While VOI and KYC both involve verifying a person’s identity, they differ significantly in scope, documentation, and verification processes. VOI is more prescriptive, focusing on property and land transactions, whereas KYC is broader and follows a risk-based approach.

Here is a simple table below outlining the key differences: 

KYC

Individual verification

• Collect the individual’s full name, date of birth and full residential address.
• Verify the name and either their address or date of birth against two reliable and independent electronic sources.
• An ID document, anti-tampering and biometric checks are optional requirements based on the client's risk.

VOI

Individual verification

• Collect the individual’s primary photographic ID document passport and driver's license (or alternative non-photographic secondary ID document e.g. birth certificate)
• There is a hierarchy of acceptable documents.
• Verification is by sighting original copies or retaining copies of documents.
• Overseas individuals are required to provide certified documents from the Australian Embassy, law firm, financial institution etc. 

KYC

Method of individual verification

• Individuals can be verified in person or remotely.

• This may be based on the client's risk.

VOI

Method of individual verification

• The conveyancer must conduct a face-to-face in-person interview with the individual.

• Remote verification technology e.g. video, Facetime, and Zoom cannot be used.

KYC

Entity verification (e.g. private companies)

• Collect the entity’s legal name, registration number and address.

• Verify this information via a company extract e.g. ASIC extract.

• Verify the identity of all direct and indirect beneficial owners holding 25% or more shareholding or voting rights.

• Where no beneficial owner holds 25% or more, verify all individuals with effective control e.g. CEO over the entity.

VOI

Entity verification (e.g. private companies)

• Collect a company search dated within the last 30 days to confirm the existence of the company

• Verify the identity of the individual(s) signing for the company. 

• There is no requirement to verify any direct or indirect beneficial owners e.g. shareholders.

KYC

Screening

• Conduct PEP and sanctions checks on the individual and entity.

VOI

Screening

•  Not required under VOI.

KYC

Frequency of refreshes

• KYC should be refreshed on an ongoing basis based on the customer’s risk level.

• All customers should be monitored in an ongoing manner to catch changes in screening status.

VOI

Frequency of refreshes

• Valid for two years.

Keep up with the latest on AML/CTF reforms

The Tranche 2 AML/CTF reforms will be implemented in 2025. Keep up with the latest developments and news on AML/CTF Tranche 2 reforms here.

In the meantime, get a head start on building your AML compliance programme. Get our free ebook, Your Complete Guide to Setting Up a Successful AML Compliance Programme - it breaks down the steps your business needs to take when setting up a successful AML compliance programme.