New laws, with a rapidly looming deadline for compliance, aim to protect the integrity of Australia’s financial system.
The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act) was introduced on December 12, 2006. Implementation of the provisions of the Act were staggered over two years to give industry more lead time for some of the systems changes that they may require.
On June 12, 2007 the requirement for businesses, including SMEs, to report on their implementation progress was introduced with the compliance report due by March 31, 2008. On December 12, 2007 the most significant provisions came into effect, with the requirement to implement an AML/CTF program. The reform strategy is a major step towards protecting the integrity of Australia’s financial system, and preventing and detecting money laundering and terrorism financing.
The Act represents the first phase of reforms and applies to banking, non-bank financial services, money transfer and bullion and gambling businesses that provide certain ‘designated services’. The designated services include opening an account, accepting deposits, making a loan, issuing a debit card, issuing travellers cheques, remittance services, funds management, superannuation, life insurance, financial planning, and stockbroking. Businesses, ranging from large companies to SMEs, and individuals who provide such services are ‘reporting entities’ under the Act.
The Act provides for a risk-based approach to regulation where reporting entities determine the best way to meet their obligations under the Act and the AML/CTF Rules. The risk-based approach is based on the reporting entity’s own assessment of the risk they may face in providing a designated service.
Under the Act, AUSTRAC continues its role as Australia's financial intelligence unit. Importantly, AUSTRAC now also has an expanded role as the national AML/CTF regulator with supervisory, monitoring, and enforcement functions over all reporting entities.
Under the Policy (Civil Penalty Orders) Principles 2006 issued on January 31, 2007, entities are expected to have taken ‘reasonable steps’ to fully meet their ongoing statutory obligations. By December 12, 2007 entities should have been either fully compliant or making steady progression towards meeting their AML/CTF program and know your customer (KYC) obligations. If not fully compliant, entities should have at least allocated appropriate resources to identify risks and implement appropriate systems and controls, and to determine milestones to ensure full compliance as early in 2008 as possible.
AML/CTF programs have two parts. One is to identify, lessen and manage the risk a business may reasonably face in providing a designated service that might involve or facilitate money laundering and terrorism financing. The second is to set out appropriate systems and controls to collect information and verify that a customer is who they say they are.
In addition to the new obligations, businesses are also required to complete a compliance report to show AUSTRAC that the business has identified and reduced their assessed risk and has given adequate resources to this task. The first report covers the reporting period from December 13, 2006 to December 31, 2007 and must be submitted to AUSTRAC by March 31, 2008. The format for the report is available on AUSTRAC’s website at www.austrac.gov.au
To ensure their understanding and subsequent compliance with these new obligations, businesses in the relevant sectors who provide designated services are advised to visit AUSTRAC’s website.
For further information and assistance contact the AUSTRAC help desk on 1300 021 037 or visit firstname.lastname@example.org
* Neil Jensen is chief executive officer at AUSTRAC
MONEY LAUNDERING FACTS
* Money laundering exists when criminals use the financial system to try to hide or disguise earnings generated from illegal activity.
- * Money laundering is the third largest ‘industry’ in the world.
- * Funds involved in money laundering equate to $4-5 billion within Australia every year.
- * The amount of money laundered annually amounts to between two to five percent of the world’s GDP, or between US$800 billion to US$2 trillion.
- * Money laundering risks will continue to increase with commercial and technological development.
- * In December 2007, Australian business will be subject to stringent new ‘phase two’ Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act). Breaches of the AML/CTF Act may result in criminal or civil penalties including imprisonment for up to 10 years and fines of up to $11 million for a corporation and up to $2.2 million for an individual.
- * This will impact 72 designated services as defined under the AML/CTF Act including financial services, bullion dealers, gaming facilities and others.
- * Veda Advantage has developed unique technology to help businesses satisfy their Know Your Customer (KYC) obligations under the AML/CTF legislation.
*Source: Veda Advantage (figures provided come from AUSTRAC, International Monetary Fund and the Australian Government Attorney General’s Department).