Anti-Money Laundering Reform
Australia is a founding member of the Financial Action Taskforce (FATF) which is an international inter-governmental policy-making body that sets standards and promotes the implementation of legal, regulatory and operational measures to combat money laundering, terrorist financing and other related threats to the integrity of the international financial system. FATF has issued standards on combating money laundering and the financing of terrorism, known as the FATF Recommendations. To ensure that Australia’s anti-money laundering and counter terrorism (AML/CTF) laws meet the FATF standards and are consistent with equivalent laws in other countries, Australia has had in place anti-money laundering and counter-terrorism financing legislation since December 2006. The AML/CTF regulator is the Australian Transaction Reports and Analysis Centre (AUSTRAC).
The AML/CTF regime covers the financing and borrowing activities of banks, general financiers and leasing companies (referred to as “reporting entities”). Reporting entities must identify, mitigate and manage the risk they may reasonably face that the provision of their services might involve or facilitate money laundering or terrorism financing. The main obligations for financiers are to appoint an AML/CTF compliance officer, verify the identity of customers (including commercial customers and the beneficial owners of trusts and private companies), carry out on-going customer and employee due diligence, provide risk awareness training to employees and third parties (such as introducers), keep records and report to AUSTRAC about suspicious matters, large cash transactions and on-going compliance.
Some of these obligations may be met by putting in place risk-based systems and controls, having regard to the nature, size and complexity of the business and the type of money laundering or terrorism financing risk that the reporting entity might reasonably face. Factors to be considered include customer types, the services/products offered, the methods by which services are delivered and any foreign jurisdictions dealt with.
During the consultation phase for the legislation, AELA made representations to ensure that changes to Members’ existing practices were kept to a minimum, particularly in relation to customer identification requirements for individuals, companies, trusts and partnerships; and to avoid the requirement for re-identification of existing customers in the absence of specific risk triggers. AELA also sought recognition of electronic verification and greater access to government databases to assist with streamlining of verification of customer information.
Since 2011 AUSTRAC has recovered from reporting entities the costs of its regulatory activities through a “Supervisory Levy” made up of a flat annual levy, a large entity component and a fee for lodgement of some types of reports. There is no charge for lodging suspicious matter reports. The justification for the levy is that reporting entities create the need for regulation and benefit from AUSTRAC’s activities which can result in detection of embezzlement and fraud, disruption of email scams and assisting creditors which suffer losses from corporate crimes. AELA argued against the levy on the basis that it is not reporting entities themselves who launder money or finance terrorism activities and that AUSTRAC’s costs should be funded out of general Government revenue. AELA continues to monitor the application of the levy to ensure that it applies to equipment financiers in proportion to the money laundering and terrorism financing risk posed by equipment finance products and customers.
AELA participates in various AML/CTF industry and government working groups, including the Financial Consultative Forum convened by the CEO of AUSTRAC. AELA also consults with Members and provides input to AUSTRAC in relation to changes to the AML/CTF Rules and other material issued by AUSTRAC to assist industry to interpret and comply with its AML/CTF obligations.