“Australia operates a deregulated floating exchange rate. There are restrictions that apply to transactions of cash or non-cash currency, whether in Australian or foreign currency. These relate to the protection and enforcement of Australia’s taxation and welfare systems and its anti-money laundering and counter-terrorist financing initiatives.”
The most significant legislation in this area is the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth) (AML/CTF Act) and the 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 and banking services, gambling services and bullion dealing. The regulatory regime has also recently been extended to the remittance sector to detect money transfers by remittance dealers used to fund people smuggling.
It is intended to expand the AML/CTF Act so that it will cover dealings in real estate, jewellery, and professional and business services, however this has not yet occurred.
The AML/CTF Act adopts a risk-based approach to money laundering, people smuggling financing and terrorism financing (ML/PSF/TF). In practice this means that those subject to the Act must undertake an assessment of the risk that their provision of services may facilitate ML/PSF/TF and then write their 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 ML/PSF/TF 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”.
1. Reporting to AUSTRAC
Report to Austrac:
- suspicious matters – ie if a reporting entity forms a suspicion on reasonable grounds that:
- any service it provides (or inquiry made about a service it provides) relates to ML/PSF/TF, or
- the customer is not who they say they are or that there is a breach of any applicable laws,
- threshold transactions – ie if a reporting entity’s customer transfers any monetary amount of $10,000 or more, whether it be cash or electronically transferred currency, and
- certain services relating to international funds transfer instructions.
2. Know your customer (KYC)
A reporting entity must first establish that it knows its customers. It does so by identifying and verifying their identity, usually before providing any designated service, and by 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 establish and comply with an AML/CTF Program to identify, mitigate and manage
its ML/PSF/TF risks.
4. Record keeping
To facilitate 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:
- the provision of a designated service
- the customer identification process followed, and
- information obtained from a customer identification process, for seven years from the end of the customer relationship.
5. Remittance Sector
In addition to extending KYC and reporting obligations to the remittance sector, recent amendments to the AML/CTF Act place mandatory requirements on remittance service providers to register with the new AUSTRAC Remittance Sector Register.