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Other Association Issues

 

Anti-Money Laundering Reform


Australia is a founding member of the international Financial Action Taskforce (FATF) on money laundering which has issued global anti-money laundering (AML) and counter-terrorism financing (CTF) standards, known as the FATF Forty Recommendations on Money Laundering and Nine Special Recommendations on Terrorist Financing. In order to ensure that Australia’s anti-money laundering laws meet the FATF standards and are consistent with equivalent laws in other countries, Australia introduced new anti-money laundering and counter-terrorism financing laws in December 2006. The first tranche of the new laws covers the financial services and gambling industries and bullion dealers.

The AML/CTF regime covers the financing and borrowing activities of banks, building societies, general financiers and leasing companies (referred to as “reporting entities”). Reporting entities must identify, mitigate and manage the risk they may reasonably face that the provision of their services might involve or facilitate money laundering or terrorism financing. Some of the obligations may be met by putting in place risk-based systems and controls, having regard to the nature, size and complexity of the business and the type of money laundering or terrorism financing risk that the reporting entity might reasonably face. Factors to be considered include customer types, the services/products offered, the methods by which services are delivered and any foreign jurisdictions dealt with. Financiers must verify the identity of their customers across a broad range of financial services, including lending, leasing, hire-purchase and factoring products. They must also implement an AML/CTF program providing for AML/CTF risk awareness training, employee due diligence and appointment of an AML/CTF compliance officer. The program must be applied to all areas of the business, including functions carried out by third parties, such as collection and verification of customer information and record keeping.

AUSTRAC is Australia’s anti-money laundering and counter-terrorism financing regulator and specialist financial intelligence unit. The new regime consists of the AML/CTF Act and Rules and various non-legislative material issued by AUSTRAC, including Policy Statements, Guidance Notes, a Self Assessment Questionnaire, a Regulatory Guide, a Typologies and Case Studies Report, a Public Legal Interpretation Series and an AML/CTF e-learning program. The new laws were introduced in a staged approach over two years. Commencing on 12 December 2006 were provisions covering identification of customers and their agents, cross-border movements of currency and negotiable instruments, electronic funds transfers, record-keeping and compliance reporting. Obligations regarding ongoing customer due diligence, transaction monitoring and reporting of suspicious matters commenced on 12 December 2008.

In response to industry concerns about the level of change required to systems and procedures in order to achieve full compliance, the Government allowed a fifteen month educative phase/assisted compliance period during which action would not be taken against a reporting entity that is taking reasonable steps to comply with the new laws. Matters to be taken into account to determine whether reasonable steps have been taken include: whether the entity has previously failed to take such steps; any steps it has taken to comply with its obligations; whether the entity complied with any obligations under the Financial Transaction Reports Act 1988; and any discussions and agreements it has had with AUSTRAC.

During the consultation phase, AELA made representations to ensure that changes to Members’ existing practices were kept to a minimum, particularly in relation to the customer identification requirements for individuals, companies, trusts and partnerships; and to avoid the requirement for re-identification of existing customers (in the absence of specific risk triggers). AELA also sought recognition of electronic verification and continues to seek greater access to government databases to assist with streamlining of verification of customer information.

AELA participates in various AML/CTF industry/government working groups, including the AML/CTF Council headed by the Minister for Home Affairs. Proposals have been put to the Minister and to AUSTRAC for amendments to the AML/CTF Act and Rules in order to ameliorate some of the operational difficulties being experienced by Members in implementing the new requirements. AELA has worked with AUSTRAC in relation to delivery of AML/CTF awareness training to the financial services industry and has published a Financier’s Guide to the AML/CTF Regime. The Guide provides an overview of the new regime with detailed guidance on customer identification requirements, AML/CTF Programs and third party/agency provisions. It includes examples of customer identification procedures for facilities commonly provided to individuals, domestic companies, trusts and partnerships. A Briefing Note about the AML/CTF requirements has been circulated to various intermediary associations, including motor traders, lease and finance brokers and insurance brokers for the information of their members. AUSTRAC continues to release Rules and various materials to assist industry to interpret and comply with its AML/CTF obligations.