Introduction
If you're a real estate agent, you'll soon hear about KYC and KYB everywhere. This guide explains what these terms actually mean and when you need to use each one - no complex compliance talk, just the basics you need to know.
What Tranche 2 Means for Agents
From July 2026, you'll need to collect more information about clients before processing property transactions. This isn't just checking their driver's licence anymore - you need to understand who they are and, if they're a business, who owns that business.
That's where KYC and KYB come in. Think of them as two different checklists - one for people, one for businesses.
What Is KYC? (Know Your Customer)
KYC stands for "Know Your Customer." It applies when your client is an individual person - not a company, not a trust, just a regular person buying or selling property.
What you're collecting: Their full name, home address, date of birth, and occupation. Plus understanding why they're buying or selling and where their money comes from.
Why it matters: You need to confirm this person is who they say they are and that their property transaction makes sense for their situation.
Simple example: John Smith wants to buy an apartment. You check his driver's licence, confirm his address, ask about his job (he's an accountant), and note he's buying it to live in using savings and a bank loan. That's KYC done.
When to do KYC: Every individual client, whether they're buying, selling, or leasing. Even if you've dealt with them before, you need current information.
What Is KYB? (Know Your Business)
KYB stands for "Know Your Business." It applies when your client is any type of business entity - company, trust, partnership, or association.
What you're collecting: The business name, registration number (ACN/ABN), who the directors are, and who actually owns the business (anyone with 25% or more ownership).
Why it matters: You need to see through the business structure to understand which real people are behind the transaction.
Simple example: ABC Investments Pty Ltd wants to buy a warehouse. You collect the company's ACN, find out Jane and Bob Brown are the directors, confirm they each own 50% of the company, and then do KYC checks on both Jane and Bob. That's KYB done.
When to do KYB: Whenever you see "Pty Ltd", "Trust", "Partnership" or any business structure on a contract or client enquiry.
The Key Difference Made Simple
Think of it this way:
- Person walks into your office = Use KYC
- Person says "I'm buying for my company" = Use KYB (then also KYC on the person)
- Contract shows a business name = Use KYB
- Rental application from an individual = Use KYC
- Commercial lease to a corporation = Use KYB
When to Conduct KYC and KYB Checks
First contact
Ask whether they're acting as an individual or for a business entity. This determines which process to follow.
Before accepting an offer
Complete full KYC or KYB before you can formally work with them.
When things change
Client switches from buying personally to buying through a trust? Start KYB process.
For existing clients
Even regular clients need updated checks when starting new transactions after a gap.
Red flag moments
Something doesn't add up? Dig deeper with enhanced KYC or KYB checks.
Real Examples You'll See Daily
Example 1 - Basic KYC
Mary wants to sell her house. She's an individual. You do KYC by checking her ID and understanding she's downsizing for retirement.
Example 2 - Basic KYB
A local café wants to lease a shop. The café is registered as "Coffee Lovers Pty Ltd." You do KYB by checking the company details and identifying the owners.
Example 3 - KYB leading to KYC
An investment company enquires about buying units. Start with KYB on the company, which reveals three shareholders. Then do KYC on each shareholder.
Example 4 - Trust needing KYB
The "Smith Family Trust" is buying property. Do KYB on the trust, identify the trustee (might be individuals or a company), then KYC on the people involved.
Common Confusion Points Cleared Up
"Is a sole trader KYC or KYB?"
Usually KYC. A sole trader is typically just an individual trading under a business name. Focus on the person.
"What about self-managed super funds?"
That's KYB. SMSFs are trusts, so you need to identify trustees and members.
"Do I need KYB for a husband and wife buying together?"
No, that's two KYCs - one for each person.
"What if I can't identify the business owner?"
You can't proceed. Every business must have identifiable owners for KYB.
14-Day Action Plan (Printable)
Day 1-2
Review your current clients - label each as "Individual" or "Business"
Day 3-4
Practice identifying business structures in property contracts
Day 5-6
Learn to spot the difference: Pty Ltd (company), Trust (needs trustee info), Partnership (multiple parties)
Day 7-8
Create a simple question list for each type of client
Day 9-10
Practice explaining KYC vs KYB to a colleague in plain English
Day 11-12
Shadow someone doing KYC and KYB checks if possible
Day 13-14
Do your first solo KYC or KYB check with supervision
FAQs (Real Estate & Conveyancers)
Q: Is VOI the same as KYC?
No. VOI (Verification of Identity) just confirms someone's identity. KYC goes further - it includes identity plus understanding their situation, occupation, and reason for transacting.
Q: When do I use both KYC and KYB?
When dealing with a business. Use KYB for the business entity, then KYC for the individual directors and owners.
Q: What if someone refuses to provide KYC or KYB information?
You cannot proceed with the transaction. Let your compliance manager know immediately.
Q: Do I need to redo KYC/KYB for existing clients?
Yes, when they start a new transaction, especially if it's been over 12 months since last contact.
Conclusion
KYC and KYB aren't complicated once you understand the basic difference. KYC is for people, KYB is for businesses. When you see an individual, think KYC. When you see a company or trust, think KYB first, then KYC on the people behind it. Master this simple distinction and you'll handle Tranche 2 requirements with confidence.
Additional Information
For more comprehensive information on Tranche 2 AML/CTF reforms and regulatory obligations, visit AUSTRAC's official website at: https://www.austrac.gov.au/about-us/amlctf-reform/new-amlctf-rules