When the counterparty refuses CDD - can I proceed with transaction under the "deemed compliance" carve-out?
Yes for the party you are not acting for, under the deemed compliance provision, but only if reasonable steps, full documentation and SMR consideration are met.
You can still legally proceed. AUSTRAC has specifically built a "deemed compliance" provision into the Rules (s 6-33) for exactly this scenario, but it only applies to the party you're not acting for, and only if you've ticked three specific boxes.
This was added in direct response to industry feedback during the rule-making — agents pointed out they have no contractual leverage over the counterparty, and AUSTRAC accepted that a blanket "no CDD = no service" rule would be unworkable for real estate. AUSTRAC introduced a deemed CDD for real estate agents to address situations where genuine attempts to conduct CDD on counterparties have been unsuccessful. AUSTRAC
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