Compliance Guidelines:

Regulatory Bodies

In Australia, the regulatory landscape for Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) involves several key bodies. The most important among them are:

AUSTRAC (Australian Transaction Reports and Analysis Centre)

AUSTRAC is the primary regulatory body for AML/CTF in Australia. It oversees compliance, collects financial transaction information, and shares this data with domestic and international partners to combat money laundering, terrorism financing, and other serious crimes.

APRA (Australian Prudential Regulation Authority)

While APRA is mainly responsible for the prudential regulation of the financial services industry, it plays a role in ensuring that financial institutions have the systems in place to manage risks, including those associated with money laundering and terrorism financing.

ACIC (Australian Criminal Intelligence Commission)

ACIC is responsible for reducing the impact of serious and organized crime. It works closely with other agencies, including AUSTRAC, to gather intelligence and share information.

The “Anti-Money Laundering and Counter-Terrorism Financing Act 2006”

Summary

• This is a significant piece of legislation in Australia aimed at combating money laundering and the financing of terrorism.
• The primary purpose of the AML/CTF Act 2006 is to detect and prevent money laundering and the financing of terrorism.
• It aligns with international efforts to combat these financial crimes, including compliance with Financial Action Task Force (FATF) recommendations.

Conditions of Application of Identity Verification

The reporting entity has previously performed or claimed to have performed a customer identification procedure for a specific customer, to whom the entity provided or planned to provide a designated service. Subsequent to the above condition, any of the following criteria are met:

• An event recognized by the AML/CTF Rules occurs.
• A situation described by the AML/CTF Rules arises.
• A timeframe, determined by the AML/CTF Rules, concludes.

Additional Note: Sections 37A and 38 also provide conditions where a reporting entity is considered to have performed the customer identification procedure.

Requirements for Reporting Entities

Reporting entities are obligated to:

• Undertake actions stipulated in the AML/CTF Rules.
• Execute the above actions within the time constraints defined by the AML/CTF Rules.

Scope of AML/CTF Compliance Reports

This section is activated if the AML/CTF Rules specify:

• A certain time frame as the “reporting period”. [47(1)(a)]
• A set duration beginning at the end of the reporting period as the “lodgment period” for that respective reporting period. [47(1)(b)]
• The specified time frame under these rules can be a recurring period.

Reporting Obligations [Section 47(2) & 47(3)]

• Reporting entities are required to submit a report to the AUSTRAC CEO within the defined lodgment period. This report should detail the entity’s adherence to the Act, the regulations, and the AML/CTF Rules during the reported period. [47(2)]

Characteristics of the report:

• Must adhere to the approved form. [47(3)(a)]
• Should include information as stipulated by the approved form. [47(3)(b)]
• Further details on report rules can be found in section 244.

Civil Penalty for Non-compliance [Section 47(4)]

• Failure to adhere to the reporting obligation in subsection (2) is liable to a civil penalty.

Exemptions to the Reporting Obligations [Section 47(5)]

• Reporting entities are exempt from this section if all the designated services they offer are encapsulated by item 54 of table 1 in section 6.
• Noteworthy: Item 54 refers to holders of an Australian financial services licence who facilitate a person in obtaining a designated service.

Provisions for Designated Business Groups [Section 47(6) & 47(7)]

• Any other member of the group can fulfill the reporting obligations on behalf of that entity. [47(6)]
• Reports pertaining to multiple reporting entities within the group can be consolidated into a single document. [47(7)]

Customer Due Diligence (CDD) and PEP Screening

• The AML/CTF Act mandates that reporting entities must conduct CDD on their customers to verify their identities and assess their risk profiles.
• Enhanced CDD measures are required for politically exposed persons (PEPs) and high-risk customers.

Compliance Programs

• Reporting entities are required to develop and implement AML/CTF compliance programs tailored to their specific risks.
• These programs should include risk assessments, policies, procedures, employee training, and ongoing monitoring.

Politically Exposed Persons (AML/CTF Act, Part 4D)

• This section outlines obligations related to identifying and conducting enhanced due diligence on politically exposed persons (PEPs) and their family members and close associates.

Sanctions List (Regulation 42):

• Regulation 42 of the AML/CTF Rules mandates that reporting entities maintain a sanctions list to identify individuals and entities subject to sanctions.
• Entities are required to regularly update this list and conduct sanctions screening against it.

Reporting and Record-Keeping (Regulation 43):

• Regulation 43 of the AML/CTF Rules requires reporting entities to maintain records of any transactions that may be related to sanctions, as well as records of actions taken in response to sanctions.

Reporting of Sanctions Compliance (Regulation 44):

• Regulation 44 of the AML/CTF Rules outlines reporting requirements for entities in cases where they have taken action due to sanctions, such as freezing assets or blocking transactions.

Criminal Code Act 1995

• This act includes provisions related to money laundering offenses and penalties for those involved in money laundering activities. It criminalizes the handling of proceeds of crime and provides for significant penalties.
• The Act includes provisions related to counter-terrorism and national security, including offenses related to terrorist acts, terrorist organizations, and financing of terrorism.

Proceeds of Crime

• Proceeds of General Crime: Money/property derived from the commission of an offence against the Commonwealth, a State, a Territory, or a foreign offence.
• Proceeds of General Crime Offence Provision: Offences listed from subsection 400.2B(2) to subsection 400.4(3B).
• Proceeds of Indictable Crime: Money/property derived from a specific or type of offence against the Commonwealth, a State, a Territory, or foreign country considered as indictable.

Autonomous Sanctions Act 2011

SECTION 3(1)

This section highlights the primary goals of the Autonomous Sanctions Act 2011:

• Provision for Autonomous Sanctions: The act provides a legal foundation for the implementation of autonomous sanctions.
• Enforcement of Autonomous Sanctions: It ensures that these sanctions, regardless of whether they are applied under this act or any other Commonwealth law, are properly enforced.
• Information Management: The act aims to streamline the gathering, distribution, and utilization of data pertinent to the execution of autonomous sanctions, irrespective of the legal source of the sanctions.
• The Autonomous Sanctions Act 2011 (Cth) allows Australia to impose sanctions independently from the United Nations in response to certain international situations or to address specific foreign policy objectives.
• These sanctions are often referred to as “autonomous sanctions” and are implemented for purposes such as promoting human rights or preventing the proliferation of weapons of mass destruction.

AUSTRAC Regulatory Guides and Guidance

• While not acts, AUSTRAC (Australian Transaction Reports and Analysis Centre) provides regulatory guides and guidance to help reporting entities understand and comply with AML/CTF obligations.
• These guides provide practical advice on various aspects of AML/CTF compliance, including risk assessments, customer due diligence, and reporting requirements.

Reference

1. Anti-Money Laundering and Counter-Terrorism Financing Act 2006
2. Autonomous Sanctions Act 2011
3. AUSTRAC – AML/CTF Rules