How does CDD work for an off-the-plan purchase where settlement is years away?

Off-the-plan is one of the complicated services under the new regime, because the assumption - a short window between commencement of service and conclusion of the business relationship - doesn't work. The CDD obligation breaks into three timing pressure points: when the designated service begins, the initial CDD window, and ongoing CDD during the long gap to settlement.

When the designated service begins. For a developer selling direct, AUSTRAC is explicit that the service starts when there's a commitment to sell or transfer — typically the exchange of contracts (not at settlement, and not at marketing/EOI stage). For a real estate agent brokering an off-the-plan sale, the trigger is entering the brokering agreement, which obviously precedes contract. For a conveyancer or lawyer assisting the buyer, the service begins when they're engaged to plan or execute the transaction. The relevant authority is AUSTRAC's Real estate designated services guidance, which states the service starts "when there's a commitment to sell or transfer the property."

Initial CDD timing. The delayed initial CDD provision gives a real estate agent or conveyancer 28 days after exchange of contracts, or before settlement, whichever is earliest. For off-the-plan, "before settlement" is irrelevant - settlement is years away - so the practical deadline is 28 days post-exchange. Developers selling direct are technically subject to the standard "before providing the service" rule but in practice rely on the same delayed-verification framework. Full initial CDD (identity, beneficial ownership, PEP/sanctions, nature and purpose, source of funds for the deposit, ML/TF risk rating) needs to be locked down within roughly three weeks of exchange - not deferred to settlement.

The business relationship runs the full distance. This is the crux. The business relationship runs from contract to settlement. AUSTRAC's program starter kit examples confirm the relationship only concludes at settlement, even where settlement is 14 months after engagement. There is no carve-out for off-the-plan. For a 24- or 36-month off-the-plan, that's the full window during which ongoing CDD obligations apply.

Ongoing CDD during the gap. Throughout the period between contract and settlement, the reporting entity must:

monitor transactions and behaviours for suspicious activity (progress payments, deposit top-ups, contract variations, requests to nominate, changes of solicitor or contact details, changes in stated funding plan);
update the customer's risk rating in response to triggers - new information may push a previously low-risk customer into medium or high (e.g. emerging PEP exposure, beneficial ownership changes, source-of-funds drift);
conduct periodic review - AUSTRAC's protracted-settlement example shows a periodic review at the ~12-month mark using a periodic review and update form. For off-the-plan, this means at minimum an annual review plus a mandatory pre-settlement refresh;
refresh sanctions and PEP screening on an appropriate cycle (daily-to-monthly is typical for active customers) - a buyer who wasn't a PEP at exchange may be one by settlement;
re-verify identity where reasonable — drivers' licences and passports expire over a 2–3 year window.

Off-the-plan-specific triggers to watch for. Five things are uniquely problematic compared with a standard 60-day settlement:

Nominations. If the contract is nominated to a different buyer (very common in off-the-plan), the nominee is a new customer and fresh initial CDD is required. The original buyer's CDD does not transfer.
Source-of-funds drift. The funding pathway disclosed at exchange (e.g. "pre-approved loan plus savings") often isn't what funds settlement years later. A pre-settlement source-of-funds check is good practice and arguably required where risk has shifted.
Beneficial ownership changes. For corporate or trust buyers, ownership and control can change materially over 2–3 years. This needs to be re-established before settlement.
Long sunset periods and rescission rights. Extended delays beyond contractual sunset can themselves be a red flag depending on circumstances.
Progressive deposits and deposit bonds. Each is a payment event during the relationship and a monitoring point.

Operational implication for a compliance program. Off-the-plan customers cannot be treated as "set and forget" after the 28-day post-exchange CDD window. A compliant program needs an explicit off-the-plan workflow that:

completes initial CDD within 28 business days of exchange;
schedules at least one mid-relationship review (generally annual is acceptable);
requires a mandatory pre-settlement refresh covering identity, sanctions/PEP, source-of-funds-for-settlement, and beneficial ownership;
treats nominations as new customer onboardings rather than amendments to an existing record.

Known gap. AUSTRAC's program starter kits do not include a dedicated off-the-plan worked example. The closest analogues are the auction and protracted-settlement examples (real estate kit and conveyancing kit), which are useful for principles but not directly on point for 24- or 36-month settlements.

How does CDD work for an off-the-plan purchase where settlement is years away?

CDD splits into three timing pressure points: initial CDD when the designated service begins and ongoing CDD during the gap between exchange and settlement.

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