AML/CTF identity records and AI data leakage: what a client identification form gives away in ChatGPT or Claude.

A financial advice licensee that is a reporting entity under the AML/CTF Act has to know who its clients are, and the identification record is where that is written down: the documents sighted, their numbers, the check that was run, where the client’s money comes from and how risky the licensee judges the client to be. Staff paste the form into ChatGPT or Claude to tidy it or fill gaps from the fact find. This page marks the items in an invented record that the AML/CTF Act, the Privacy Act and the Code of Ethics bear on, and shows the same record handled on Ermos inside the practice.

The AML/CTF client identification record

Completed when a client is onboarded, before the practice provides its service, and updated by the practice when circumstances change. AUSTRAC says item 54 of table 1 in section 6 of the AML/CTF Act applies when the holder of an AFS licence, acting in that capacity, makes arrangements for a person to receive another designated service, and that a business providing only item 54 services must conduct initial customer due diligence before it starts to provide a designated service but is exempt from ongoing customer due diligence.

Customer identification and risk record
Harbourview Wealth Partners · Confidential · AML/CTF program, version 4

Customers
Document 1 (Tom)
Document 2 (Lucy)
Verification
Source of funds
Screening
Review 21 October 2026
Completed by

An invented record. The licence, passport and verification reference numbers are placeholders. Hover or tap any highlighted item for the analysis; the full list is below.

What leaves the practice

  1. 1
    Names, dates of birth and the home address

    Two complete identities and the address at which they live. Personal information under the Privacy Act. OAIC says small businesses that are reporting entities must comply with the Act for activities connected with their AML/CTF obligations. Privacy Act guide.

  2. 2
    A driver licence number and expiry

    A government identifier with its expiry date and the date it was sighted. AUSTRAC says a reporting entity is not required to keep the identification documents under its record keeping obligations and can instead record details of them, so the number itself is part of the record. Privacy Act guide.

  3. 3
    A passport number and expiry

    A second government identifier. Enough, with a date of birth and name, to impersonate the holder. Privacy Act guide.

  4. 4
    The verification result

    Which check was run, the reference, the date and which data points matched. A record the licensee relies on to show it knew its customer. It also reveals which data points did not match.

  5. 5
    The source of funds

    Where the clients’ money comes from, with an employer, incomes, a fund and a mortgage lender. Financial information about the clients, assembled for a compliance purpose. Privacy Act guide.

  6. 6
    Screening results and the risk rating

    The licensee’s assessment of how risky these customers are and the date of the next review. A compliance judgement, and the licensee’s own AML/CTF program document at work.

  7. 7
    A change in circumstances and a statement about suspicion

    A redundancy recorded as a change in source of funds, and a statement that no suspicious matter was identified. The AML/CTF Act contains tipping-off offences about suspicious matter reports. This record has none, and a record that did would be among the most restricted in the practice. Privacy Act guide.

  8. 8
    The adviser and the compliance manager

    Names the staff who verified and approved the record. Ties the record to individuals who carry the practice’s obligations under its licensee’s program.

What happens in Frontier Models (ChatGPT, Claude)

  • The whole document is transmitted to the provider’s servers. On personal plans the user cannot choose where it is stored or processed, and for the major providers that has generally meant outside Australia, under that country’s legal process. Some business plans offer storage in Australia, but the provider still receives the content.
  • On consumer tiers, prompts can be retained and used to train future models.
  • The provider’s staff and systems can reach the content under the provider’s own policies.
  • Once sent, the practice no longer controls it. Retention and deletion happen on the provider’s terms.

The same document on Ermos

Ermos Dominion

The document is drafted on a unit in your office, from your own templates and the client file. Every marked item stays on the unit, which keeps working with the internet switched off. Nothing in it is transmitted to an AI provider, so there is no disclosure to analyse: the confidentiality work is the same as for your file server.

Ermos Edge

Your documents, the index and your access boundaries stay on your own instance in an Australian data centre. When a staff member asks for this draft, only their question and the excerpts they are permitted to see go to a named Australian provider, who is contractually barred from keeping the content or training any model on it. Nothing is processed outside Australia.

Frontier Models (ChatGPT, Claude)Ermos EdgeErmos Dominion
Where the document is processedProvider servers, generally offshore on personal plansYour instance in an Australian data centre; answers generated in AustraliaThe unit in your office
Who can read itProvider staff and systems, under policyYour staff, within the boundaries you set. The named Australian provider processes only permitted excerpts, under contract, and keeps nothingYour staff only
Is it keptOn the provider’s termsKept on your instance; the provider is barred from retaining itStays on the unit
Can it train a modelOn consumer tiers, yesNo, by contractOnly your own unit learns from it, on your hardware

Part of AI data leakage in financial advice practices.

Common questions

Do ChatGPT and Claude use the information in an AML/CTF identity record?
Yes, everything pasted or uploaded from the record is sent to the AI company's servers and processed there to produce a reply. As at October 2026, whether a conversation on a personal plan (ChatGPT Free, Plus or Pro; Claude Free, Pro or Max) can be used to train the models depends on a setting each user controls. Business plans (ChatGPT Business and Enterprise, Claude Team and Enterprise) and the developer APIs sit under commercial terms, and OpenAI and Anthropic each say they do not train on that content by default (OpenAI, Anthropic). On either product, the thumbs up and thumbs down buttons can send a whole conversation back for training. This record lists a driver licence and a passport number with expiry dates, a home address, the source of funds and the practice's risk rating of two clients.
Is it safe to paste an AML/CTF identity record into ChatGPT or Claude?
No, because the record exists to prove who two people are. The Office of the Australian Information Commissioner (OAIC) recommends in its guidance on commercially available AI products that organisations do not enter personal information, and particularly sensitive information, into publicly available generative AI tools, because of the significant and complex privacy risks. The licence and passport numbers, the dates of birth and the address stay identifying after the names come out, and the source of funds names an employer, a super fund and a lender. Removing names rarely makes a document anonymous. Information stays personal information while the person is reasonably identifiable, and the OAIC warns that information can be at risk of re-identification even when it has been de-identified or anonymised.
Can ChatGPT or Claude remember the details in an AML/CTF identity record later?
They can. Both products also have memory features that can carry details from one conversation into later ones, and on a personal account each user decides whether they are switched on (ChatGPT, Claude). A licence number, a passport number with its expiry and a home address are the details that let someone pose as a client. Those details could follow the user into a later conversation on a different subject, long after the record was finished.
How can an advice practice use AI for an AML/CTF identity record without sending it to ChatGPT or Claude?
Ermos is built so the document stays under your control. On the Dominion AI unit it is drafted inside your office and none of it is sent to an AI provider. On Ermos Edge your documents and index stay on your own instance in an Australian data centre, and only the question and the excerpts the user is permitted to see go to a named Australian provider that is contractually barred from keeping them or training any model on them. The record is prepared from the client file and the practice's own identification template. The adviser checks each entry against the documents sighted, and the compliance manager reviews it under the licensee's program.
Is financial advice covered by the AML/CTF Act?
AUSTRAC says item 54 of table 1 in section 6 of the AML/CTF Act applies when the holder of an AFS licence, acting in that capacity, makes arrangements for a person to receive another designated service. A licensee that provides a designated service is a reporting entity and holds the obligations, so an adviser should follow the licensee's AML/CTF program rather than rely on a general summary, and check it with the licensee.
Do existing advice licensees have to use the new customer due diligence straight away?
AUSTRAC says the reforms began for existing reporting entities on 31 March 2026. An entity that was enrolled on 30 March 2026, and whose AML/CTF policies required the earlier applicable customer identification procedures, may keep applying them instead of the new initial customer due diligence until 31 March 2029, if by 1 July 2026 it listed the customer classes and the date it will stop for each. A licensee's program says which approach it uses, so the practice should ask its compliance team.
Does the Privacy Act apply to a small advice practice's identity records?
OAIC says businesses with annual turnover of $3 million or less are generally outside the Privacy Act, but a small business that is a reporting entity must comply with the Act for activities connected with its AML/CTF obligations. That includes collecting and keeping identity documents. Outside those activities the exemption can still apply, so the answer depends on the practice.

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