“Australia operates a deregulated floating exchange rate. The restrictions that apply to cash transactions, whether in Australian or foreign currency, relate to the protection and enforcement of Australia’s taxation and welfare systems and its anti-money laundering and counter-terrorist financing initiatives.”
This regulation is under the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (AML/CTF Act) and anti-money laundering provisions of the Federal Criminal Code 1995.
An organisation is subject to the AML/CTF Act to the extent it provides a “designated service”. The AML/CTF Act defines various “designated services” being services which may give rise to opportunities for money laundering and terrorism financing, such as a broad range of financial services and banking services, gambling services and bullion dealing.
It is intended to expand the AML/CTF Act to cover dealings in real estate, jewellery, professional and business services, however this has not yet occurred.
The AML/CTF Act adopts a risk-based approach to AML/CTF. In practice this means that those subject to it must undertake an assessment of the risk that its provision of services may facilitate ML/TF and then write its own AML/CTF procedures based on that risk assessment, directing resources towards the highest risks. However the procedures must meet some statutory minimums even in the case of low risk.
The purpose of the AML/CTF Act is to minimise money laundering and terrorism financing through financial intelligence, so the core obligation under the AML/CTF Act is to report matters to Austrac, Australia’s financial intelligence unit. Accordingly, an organisation subject to the Act is a “reporting entity”.
The key obligations of reporting entities are described below.
Report to Austrac:
- suspicious matters – ie if it forms a suspicion on reasonable grounds that:
- (a) any service it provides (or inquiry made about a service it provides) relates to ML/TF, or
- (b) the customer is not who they say they are or that there is a breach of any applicable laws, and
- threshold transactions – ie if its customer transfers physical currency (ie coin and printed money) of $10,000 or more, and
- certain services relating to international funds transfer instructions.
2. Know your customer (KYC)
To inform its reporting, the reporting entity must know its customers by identifying and verifying their identity, usually before providing any designated service, or re-verifying a customer’s identity in some circumstances, such as where a suspicious matter occurs in relation to the customer. Identification and verification requires the collection of reliable and independent documentation and data. Minimum information is required depending on the type of customer.
Ongoing customer due diligence is also required, such as the monitoring of customer transactions to detect complex or unusual transactions.
3. AML/CTF Compliance Program
The reporting entity must have and comply with an AML/CTF Program to identify, mitigate and manage
its ML/TF risks.
4. Record keeping
To support financial intelligence and law enforcement, the reporting entity must keep:
- any record it makes relating to the provision of a designated service – for seven years from the transaction date, and
- any document provided by one of its customers relating to:
- (a) the provision of a designated service
- (b) the customer identification process followed, and
- (c) information obtained from a customer identification process, for seven years from the end of the customer relationship.