Over the past two years, a series of legislative reforms aimed at bringing Australia's AML/CTF regime into line with international standards have been rolled out:
SMSF's and licensed financial advisers are expected to be caught in the second set.
People who provide 'designated services' are 'reporting entities' and have obligations under the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Act) and associated Rules. Reporting entities are regulated by the Australian Transaction Reports and Analysis Centre (AUSTRAC). Examples of reporting entities include:
Each reporting entity must adopt an AML/CTF Program. The program is to have two parts. Much of the content of a program is prescribed by the Rules.
The primary purpose of Part A of a standard program is to identify, manage and reduce money laundering and terrorism financing (ML/TF) risks that a reporting entity may reasonably face.
A reporting entity must consider the risks posed by the following factors:
The reporting entity must then establish risk-based controls and procedures to manage and mitigate the ML/TF risks identified. Key obligations include:
Part A of the Program must be audited on an annual basis.
The primary purpose of Part B of a standard program is to set out the reporting entity's customer identification procedures.
Generally, a reporting entity must collect minimum information before providing a designated service to the customer. This information must then be verified against independent documentation or electronic data. However, limited exemptions can apply — for example, if:
The Rules prescribe different Know Your Customer (KYC) procedures for different types of customers — individuals, companies, trustees, partners, unincorporated associations, registered co-operatives and government entities.
Based on the analysis in Part A of the program, a reporting entity must then include appropriate risk based systems and controls to determine whether:
Reporting entities must also put in place processes so they can respond to discrepancies that arise in the course of collecting and verifying the KYC information.
The Act allows for a reporting entity to rely upon an outsourced provider to conduct the KYC procedures where that provider is acting as the reporting entity's agent.
A reporting entity must appoint an AML/CTF Compliance Officer. AUSTRAC has indicated that a reporting entity should consider the person's independence, seniority, accountability, reporting lines, access to executive/board and relevant skills and experience.
From 12 December 2008, reporting entities will be required to monitor their customers and the transactions that they make with a view to reporting any suspicious matters that arise to AUSTRAC.
The Act also requires reporting entities lodge reports with AUSTRAC relating to:
The Act requires reporting entities to retain certain records for seven years. Reporting entities will need to ensure that its systems are capable of capturing and storing the required information and documentation.
Those already caught by the first set of legislation, should be well under way in preparing for:
For those who may be caught by the second set of legislation, it pays to be prepared. At this stage, people need to consider:
For questions or more information about Anti-Money Laundering and Counter-Terrorism Financing obligations, call Maddocks in Melbourne (03 9288 0555) or Sydney (02 8223 4100) and ask for a member of the Maddocks Funds Management and Superannuation Team.
Paul is a Senior Associate in the Maddocks Commercial team with particular expertise in commercial agreements for the supply of goods and/or services, the Personal Property Securities Act 2009, the National Consumer Credit Protection Act 2009 and the National Credit Code and the Australian Consumer Law.
Paul's key areas of practice include:
Before joining Maddocks, Paul was employed for 13 years with the Victorian Department of Justice, principally as a Deputy Registrar in the Victorian Magistrate's Court, but also as a legislation, policy and project officer for the Department.
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For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.