Enhancing Australia’s
AML/CTF regime
Phase 1 amendments to the
Anti-Money Laundering and Counter-Terrorism
Financing Act 2006
Industry consultation paper
December 2016
Table of Contents
1.
Introduction .......................................................................................................................................1
1.1 What is the purpose of the consultation paper?...............................................................................1
1.2 How can you have your say? ............................................................................................................1
2. Proposals for reforms ............................................................................................................................3
2.1 Objects of the Act.............................................................................................................................3
2.2 Principles of the Act .........................................................................................................................4
2.3 Powers and functions of the AUSTRAC CEO ......................................................................................5
2.4 Infringement notices and civil penalties ...........................................................................................8
2.5 Customer due diligence..................................................................................................................10
2.6 Correspondent banking ..................................................................................................................13
2.6 Cash dealers under the FTR Act ......................................................................................................15
2.7 Designated business groups ...........................................................................................................15
2.8 Definitions......................................................................................................................................16
2.9 Secrecy and access .........................................................................................................................17
1. Introduction
1.1 What is the purpose of the consultation paper?
The purpose of this paper is to obtain feedback on proposals for the first phase of legislative reforms for the
Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
On 29 April 2016, the Minister for Justice tabled in Parliament the report of the statutory review of the AML/CTF
Act and the associated Rules and Regulation (the AML/CTF regime). The report makes 84 recommendations to
strengthen, streamline and simplify Australia’s AML/CTF regime, and enhance Australia’s compliance with the
international standards for combating money laundering and terrorism financing set by the Financial Action Task
Force (FATF), an inter-governmental policy-making body. 1
As a member of the FATF, Australia periodically undergoes a mutual evaluation to assess its compliance with the
FATF Recommendations and the effectiveness of its anti-money laundering and counter-terrorism financing
(AML/CTF) measures. The report of the 2015 mutual evaluation of Australia identified a number of deficiencies
and made a number of recommendations to strengthen compliance and effectiveness. 2 These recommendations
have been taken into account as part of the statutory review.
The Government is now consulting with industry on proposals to implement the recommendations from the
report of the statutory review across two phases.
Phase 1 will consider initiatives that have been identified as priority projects for introduction in 2017.
Phase 2 will progress significant reforms, the detail of which need to be developed in close consultation with
Government agencies and industry. These include measures to simplify, streamline and clarify AML/CTF
obligations, and strengthen compliance with the FATF standards. These reforms will be developed in the longer–
term (2016-2019), with some commenced concurrently with Phase 1 initiatives.
A project plan that provides a ‘road map’ for consulting with industry on the implementation of review
recommendations is also available on the Attorney-General’s Department’s website.3
The proposals for legislative reform in this paper are Phase 1 initiatives and excludes the proposal for regulating
digital currency exchange providers. A separate paper has been developed that outlines the proposals for the
regulation of digital currency exchange providers, which will be released shortly.
Some of the initiatives in this paper closely reflect the recommendations from the review that were developed
following an extensive consultation process. Other initiatives provide greater detail of reform proposals arising
from review recommendations and for these proposals discussion questions are posed.
1.2 How can you have your say?
Submissions are invited on the reform proposals set out in this consultation paper.
If you would like to make a submission, please forward it to:
Financial Crime Section
Transnational Crime Branch
Criminal Justice Policy and Programmes Division
1
The Financial Action Task Force promotes the effective implementation of measures for combating ML/TF and other related threats to the integrityof the
international financial system.
2
Financial Action Task Force, Anti-money laundering and counter-terrorist financing measures, Australia: Mutual Evaluation Report, April 2015:
http://www.fatf-gafi.org/documents/documents/mer-australia-2015.html.
3
Available at: www.ag.gov.au/Consultations/Pages/Consultation-on-AMLCTF-review-reform-project-plans.aspx.
1
Attorney-General’s Department
3-5 National Circuit
BARTON ACT 2600
Submissions may also be submitted electronically to [email protected]. The closing date for
submissions is 31 January 2016.
2
2. Proposals for reforms
This paper explores reform proposals that relate to:
• expanding the objects of the AML/CTF Act
• developing principles to guide the administration of the AML/CTF Act
• expanding the powers and functions of the AUSTRAC CEO across a number of areas
• expanding the infringement notice provisions to include a wider range of minor regulatory and compliance
offences
• extending the class of agencies that have the power to issue infringement notices and apply for civil penalties
• introducing customer due diligence reforms, including changes to the reliance provisions
• deregulating the cash-in-transit sector
• deregulating insurance intermediaries and general insurance providers (except motor vehicle dealers),
• revising the framework for designated business groups
• addressing a number of definitional issues
• clarifying the correspondent banking obligations, and
• overhauling the AML/CTF Act’s secrecy and access arrangements for AUSTRAC information.
2.1 Objects of the Act
COMMENT: There was strong support among stakeholders who provided submissions to the statutory review
for expanding and updating the objects of the AML/CTF Act. Five new objects are proposed.
PROPOSAL:
4
REVIEW RECOMMENDATION 3.1
REFORM PROPOSAL
The AML/CTF Act should be amended to include
objects that relate to the following concepts:
• implementing measures to detect, deter and
disrupt money laundering, the financing of
terrorism, the proliferation of weapons of mass
destruction and its financing and other serious
crimes
• responding to the threat posed by money
laundering, the financing of terrorism, the
proliferation of weapons of mass destruction
and its financing and other serious crimes by
providing regulatory, national security and law
enforcement officials with the information they
need to detect, deter and disrupt these crimes
• supervision and monitoring of compliance by
reporting entities with Australian sanction laws 4 ,
and
• promoting public confidence in the Australian
financial system.
2.1 That the following objects be added to the AML/CTF Act:
• to implement measures to detect, deter and disrupt
money laundering, the financing of terrorism, the
proliferation of weapons of mass destruction and its
financing, and other serious crimes
• to provide relevant government agencies and
international counterparts with the information they need
to investigate and prosecute money laundering, the
financing of terrorism, the proliferation of weapons of
mass destruction and its financing, and other serious
crimes
• to support co-operation and collaboration among
reporting entities, AUSTRAC and other government
agencies, particularly law enforcement, to detect, deter
and disrupt money laundering, the financing of terrorism,
the proliferation of weapons of mass destruction and its
financing, and other serious crimes
• to provide for the supervision and monitoring of reporting
entities’ compliance with Australian sanction laws, and
• to promote public confidence in the Australian financial
system.
This proposed object is subject to approval of the Government once resourcing and regulatory impacts have been considered.
3
2.2 Principles of the Act
COMMENT: There was strong support among stakeholders who provided submissions to the statutory review
for the inclusion of legislative principles to guide the administration of the AML/CTF Act.
There are three proposed principles that underpin the AML/CTF regime:
•
the risk-based approach
•
protecting privacy, and
•
the sharing of financial intelligence to detect and deter serious and organised crime.
PROPOSAL:
REVIEW RECOMMENDATION 3.2
REFORM PROPOSAL
The AML/CTF Act should be amended to insert general
principles for the administration of the Act that provide
for the following:
• AML/CTF obligations under the AML/CTF Act,
Rules and Regulations should be proportionate to
the ML/TF risks faced by reporting entities
• regulatory, national security and law enforcement
agencies should have access to the information
they need to detect, deter and disrupt money
laundering, the financing of terrorism, the
proliferation of weapons of mass destruction and
its financing, contraventions of Australian
sanctions laws and other serious crimes (subject
to consideration in Chapter 15 of this report), and
• AML/CTF obligations under the AML/CTF Act,
Rules and Regulations should be designed and
implemented in a way that minimises and
appropriately addresses the privacy risks and
impacts associated with the handling of personal
information.
2.2 That principles for administration of the AML/CTF Act
be included in the Act that provide for the following:
•
obligations under this Act, and any Rules and
Regulations made under this Act should be
proportionate to the money laundering and
terrorism financing risks faced by reporting
entities
•
•
obligations under this Act, and any Rules and
Regulations made under this Act, should be
designed and implemented in a manner that
appropriately addresses the privacy risks and
impacts associated with the handling of personal
information, and minimises those risks, where
appropriate, and
regulatory, intelligence, national security and law
enforcement and other relevant government
agencies should have access to the information
they need to detect, deter and disrupt money
laundering, the financing of terrorism, the
proliferation of weapons of mass destruction and
its financing, contraventions of Australian
sanctions laws and other serious crimes.
4
2.3 Powers and functions of the AUSTRAC CEO
2.3.1 General powers and functions
COMMENT: These proposals would update the AUSTRAC CEO’s functions to reflect the full range of work
performed by AUSTRAC. This includes the role played by AUSTRAC in supporting international and collaborative
efforts to combat money laundering, terrorism financing (ML/TF) and other serious crimes, as well as efforts to
support government policy-making, industry education, expanded typologies, public alerts, and academic
research. The latter proposal would also complement recommended reforms to the secrecy and access
provisions in the AML/CTF Act to improve information-sharing under the Act.
The proposal would also give the AUSTRAC CEO a standard power to perform his or her functions, consistent
with the powers conferred upon other CEOs of Commonwealth Government agencies.
PROPOSAL:
REVIEW RECOMMENDATION 16.1
REFORM PROPOSAL
The AML/CTF Act should be amended to:
•
give the AUSTRAC CEO the power to do all
things necessary or convenient to be done for,
or in connection with, the performance of his or
her duties, and
•
expand the scope of the functions of the
AUSTRAC CEO to include:
• retaining, compiling and analysing AUSTRAC
information
• facilitating access to, and the sharing of,
AUSTRAC information to support domestic
and international efforts to combat money
laundering, terrorism financing and other
serious crimes, and
• disseminating AUSTRAC information, where
appropriate, to support government policymaking, industry education, public education
and academic research.
2.3.1(a) Amend subparagraph 212(1)(a) to give the
AUSTRAC CEO a function that relates to retaining,
compiling, analysing and disseminating AUSTRAC
information rather than just eligible collected information.
2.3.1(b)Insert additional functions for the AUSTRAC CEO
under section 212 that relate to:
• providing access to, and the sharing of, AUSTRAC
information to support domestic and international
efforts to combat money laundering, terrorism
financing and other serious crimes
• enabling access (either directly or indirectly) on a
timely basis to the financial, administrative, and law
enforcement information that the AUSTRAC CEO
requires to properly undertake his or her financial
intelligence functions, and
• disseminating AUSTRAC information to support
government policy-making, industry education, other
education and academic research.
2.3.1(c) Insert an additional general power into Division 3
of Part 16 that gives the AUSTRAC CEO the power to do all
things necessary or convenient to be done for or in
connection with the performance of his or her functions.
5
2.3.2 Determining exemptions
COMMENT: The FATF’s mutual evaluation of Australia’s AML/CTF regime concluded that exemptions from
AML/CTF obligations granted by the AUSTRAC CEO were inconsistent with the international standards because
they were not granted solely on the basis of a demonstrated low ML/TF risk. 5 This inconsistency arises because
subsection 212(3) of the AML/CTF Act does not explicitly require the AUSTRAC CEO, in performing his or her
functions under the Act, to consider ML/TF risk.
The proposed amendment would address this deficiency, requiring the AUSTRAC CEO to consider the level of
ML/TF risk posed by the exemption or modification as the primary consideration. However, the AUSTRAC CEO
will still have to consider the other factors under subsection 212(3) as secondary considerations.
PROPOSAL:
REVIEW RECOMMENDATION 17.1
REFORM PROPOSAL
The AML/CTF Act should be amended to set out the
specific matters that the AUSTRAC CEO must take
into account when determining exemptions, with the
level of ML/TF risk posed being the prime
consideration.
2.3.2 Amend section 212 to provide that the AUSTRAC CEO
must take into account the level of ML/TF risk as the
primary consideration when making Rules or granting
exemption or modifications.
2.3.3 Expanding the remedial direction power
COMMENT: The AUSTRAC CEO cannot currently issue a remedial direction to require the reporting entity to
retrospectively comply with the relevant AML/CTF obligation (where the reporting entity has failed to comply
with that obligation in the past). This deficiency has particular implications where a reporting entity has failed to
submit transaction or compliance reports.
This proposal would allow the AUSTRAC CEO to issue directions for a reporting entity to retrospectively comply
with an obligation. This could include directing a reporting entity to:
• lodge a suspicious matter report (SMR) relating to a specific customer/s or transaction/s that occurred in
the past where the reporting entity formed the prerequisite level of suspicion
• lodge a threshold transaction report (TTR) relating to a specific transaction/s that occurred in the past
• lodge an International Funds Transfer Instruction (IFTI) report relating to a specific transaction/s that
occurred in the past, and
• lodge a compliance report for a specified reporting period.
PROPOSAL:
REVIEW RECOMMENDATION 15.3
REFORM PROPOSAL
The AML/CTF Act should be amended to expand the
remedial directions power to allow AUSTRAC to direct
reporting entities to remedy past contraventions of
AML/CTF reporting obligations.
2.3.3 Amend section 191 to give the AUSTRAC CEO the
power to issue a reporting entity a written direction
requiring the reporting entity to remedy a past
contravention of a civil penalty provision.
2.3.4 Expanding the power to deregister remitters
COMMENT: These proposals would give the AUSTRAC CEO stronger powers to control the registration of
remitters and assist in addressing some of the ML/TF risks posed by the sector.
The AUSTRAC CEO currently has no power to remove or cancel a registered remitter that is inactive or ban
individuals, such as key personnel, from being involved in the industry. A power to deregister a remitter’s
5
FATF Recommendation 1 (As sessing risks a nd a pplying a risk-based a pproach). See cri terion 1.6 of the FATF Methodology or pa ragraph
a 2.7of the MER.
6
registration once the remitter ceases to carry on a remittance business would ensure that the registration is not
passed on to a third party and used to avoid scrutiny by AUSTRAC.
Giving the AUSTRAC CEO the power to ban individuals (those who are found to be unsuitable because of a lack
of fitness or propriety, or because they have breached relevant Commonwealth, state or territory laws) would
help prevent criminal infiltration and exploitation of the sector. Similar powers operate in the gaming industry.
The publication of the names of entities that have had their remittance registration refused or cancelled, or
renewal of registration declined, would help deter non-compliance and criminal links within the sector.
Publication of this information, and information about suspension of registration, will also alert other financial
businesses that an entity is no longer registered.
PROPOSAL:
REVIEW RECOMMENDATION 11.4
REFORM PROPOSAL
The AUSTRAC CEO should be allowed to:
2.3.4 That the AML/CTF Act be amended to
provide for the following:
• The AUSTRAC CEO may cancel the registration of a
person if the AUSTRAC CEO is satisfied that the person
is no longer conducting remittance activities. A notice
should be provided to the person that sets out the
decision and the date from which registration will be
cancelled. A decision to cancel registration on this basis
should be reviewable.
• The AUSTRAC CEO may ban individuals from
involvement in the management or business of a
remitter based on a demonstrated lack of suitability,
fitness or propriety.
• The AUSTRAC CEO may publish the details of any
registration decision, including a decision to suspend
registration, refuse to register a person on the
Remittance Sector Register (including a decision to
refuse to renew registration) or cancel the registration
of a person on the Remittance Sector Register.
(a) deregister remitters that are not conducting
remittance activities (as evidenced by a lack
of reporting or other relevant activity)
(b) ban individuals from involvement in the
management or business of a remitter based
on a demonstrated lack of suitability, fitness
or propriety, and
(c) publish refusals and notices detailing the
circumstance of a cancellation of the
registration of a remitter.
2.3.5 Remitter registration and reviewable decisions
Comment: The power of the AUSTRAC CEO to renew registrations with conditions imposed is unclear. It is also
unclear whether a decision of the AUSTRAC CEO to refuse an application for a registration renewal is reviewable.
NEW PROPOSAL
The AML/CTF Act should be amended to:
• give the AUSTRAC CEO an explicit power to
impose conditions on registration renewal
as well as new registrations, and
• clarify that a refusal to renew registration is
a reviewable decision.
PROPOSAL
2.3.5 Amend Part 6 to provide that the AUSTRAC CEO can
renew the registration of a remitter and impose conditions
on the renewal.
2.3.6 Amend section 233B of the AML/CTF Act to add a
decision made under paragraph 70.9(2) of the AML/CTF
Rules as a reviewable decision.
7
2.4 Infringement notices and civil penalties
2.4.1 Expanding the infringement notice provisions
COMMENT: This proposal would apply the infringement notice provisions to contraventions of a broader range
of minor offences that are regulatory in nature. This would give the AUSTRAC CEO additional, more expedient
means for promoting and encouraging compliance, as an alternative to applying for a civil penalty order through
the Federal Court.
PROPOSAL:
REVIEW RECOMMENDATION 15.4
REFORM PROPOSAL
The AML/CTF Act should be amended to expand the
infringement notice provisions under subsection
184(1A) to include a wider range of minor offences
established under the AML/CTF Act that are
regulatory in nature.
2.4.1 Expand the range of contraventions for which an
infringement notice can be given to contraventions of the
following provisions:
•
subsection 32(2) (failure to carry out the applicable
customer identification procedure before the
commencement of a designated service)
•
subsection 41(2) (lodging SMRs within a specified
time frame)
•
subsection 43(2) (lodging a TTR within a specified
time frame)
•
subsection 45(2) (lodging an IFTI within a specified
time frame)
•
section 47 (lodging a compliance report within a
specified time frame)
•
subsection 49(2) (providing further information on
request within the specified time frame)
•
subsection 50(3) (providing information about the
identity of holders of foreign credit cards and foreign
debit cards)
•
subsection 50(4) (providing information about the
identity of holders of foreign credit cards and foreign
debit cards)
•
subsection 50(5) (providing information about the
identity of holders of foreign credit cards and foreign
debit cards)
•
subsection 81(1) (requirement for reporting entities
to have an AML/CTF program)
•
subsection 116(2) (records of adoption of an AML/CTF
program)
•
subsection 116(3) (retention of an AML/CTF
program), and
•
subsection 116(4) (retention of a variation of an
AML/CTF program).
8
2.4.2 Power to issue infringement notices and apply for civil penalty orders
COMMENT: This proposal is to extend the power to issue infringement notices and apply for civil penalty orders
for non-compliance to partner agencies that are able to issue written notices and directions under sections 49
and 50 of the AML/CTF Act (the Australian Tax Office, the Australian Federal Police, the Australian Criminal
Intelligence Commission and the Australian Commission for Law Enforcement Integrity).
This would be a more efficient way of responding to non-compliance, rather than requiring a partner agency to
refer the matter to AUSTRAC for enforcement.
PROPOSAL:
REVIEW RECOMMENDATION 15.5
REFORM PROPOSAL
The AML/CTF Act should be amended to give
agencies that already have the power to issue notices
to a person or reporting entity under sections 49 and
50 of the AML/CTF Act an additional power to issue
infringement notices or apply for civil penalties if that
person or entity fails to comply with such a notice.
2.4.2 That the AML/CTF be amended to provide that:
a) the issuer of a notice under subsection 49(1) or 50(2)
may apply for a civil penalty order relating to a
contravention of subsections 49(2), 50(3), 50(4) or
50(5) (i.e. not just AUSTRAC), and
b) the issuer of a notice under subsection 49(1) or 50(2)
may give an infringement notice to a person who has
contravened the requirements of subsections 49(2),
50(3), 50(4) or 50(5) (in relation to the notice they
have issued).
9
2.5 Customer due diligence
2.5.1 Reliance
COMMENT: Reliance is the process where a reporting entity relies on a third party to conduct customer due
diligence (CDD). It is an important process that can deliver significant regulatory efficiencies and benefits for
reporting entities.
Currently a reporting entity is able to rely on an applicable customer identification procedure (ACIP) in limited
circumstances such as when it is carried out by a second reporting entity that is a licenced financial advisor or a
fellow member of a designated business group. 6 Reliance may also extend to customer identification conducted
in a foreign country in certain circumstances (e.g. New Zealand).7
The review recommended expanding the ability of reporting entities to rely on third parties.
The proposed framework for reliance set out below adopts certain characteristics applied in the United
Kingdom, the Republic of Ireland and other EU Member States and is consistent with the FATF standards. 8 The
model outlines legislative obligations, suggests areas where guidance should be provided and outlines best
practice/non-binding responsibilities.
To maintain compliance with the FATF standards, the model does not propose allowing reliance on professionals
such as lawyers, accountants, auditors and insolvency practitioners located in Australia. These professions are
not currently subject to AML/CTF regulation in Australia. The reliance provisions should be expanded to include
these professions if they are incorporated into Australia’s AML/CTF regime in the future. To maximise utility, the
model does, however, propose allowing reliance on these professions overseas where they are regulated and
supervised for compliance with CDD and record-keeping requirements comparable to Australia.
The model for reliance does not propose to mandate a list of acceptable foreign countries for reliance purposes.
Instead, and with AUSTRAC guidance, reporting entities will use the risk-based approach to identify acceptable
foreign countries that have comparable AML/CTF regimes to Australia.
To further assist reporting entities to use reliance, AUSTRAC intends to allow reporting entities to search the
Reporting Entities Roll to verify whether an entity that they intend to do business with is regulated by AUSTRAC. 9
Feedback from industry is sought on:

whether the proposed model maximises the utility of the reliance provisions

the extent to which reporting entities should be able to rely on CDD conducted by other businesses/
reporting entities, and

how suitable prescribed third parties domiciled outside of Australia should be identified.
Feedback is also sought on how the definition of designated business group under the AML/CTF Act could be
amended to better reflect business relationships between entities and enable greater use of reliance provisions
(see proposal 2.7).
PROPOSAL:
REVIEW RECOMMENDATION 5.12
REFORM PROPOSAL
The AML/CTF Act should be amended to expand the
ability of reporting entities to rely on customer
identification procedures performed by a third party,
subject to the following conditions:
2.5.1 That the AML/CTF Act be amended to implement a
model for reliance with the following features:
•
Reporting entities should be permitted to rely on a
prescribed third party to conduct the applicable
See section 38 of the AML/CTF Act and Chapter 7 of the AML/CTF Rules.
AUSTRAC CEO, Declaration, 16 March 2009, http://www.austrac.gov.au/sites/default/files/documents/declaration_s38.pdf
8
Australia’s MER found Australia to be partially compliant with the FATF standard for reliance (FATF Recommendation 17).
9
Recommendation 5.13.
6
7
10
REVIEW RECOMMENDATION 5.12
REFORM PROPOSAL
(a) where the third party agrees to being relied
on, the relying business remains ultimately
responsible for customer due diligence
measures, and
customer identification procedure for a customer
provided that:
a) the prescribed third party provides the
reporting entity with explicit and informed
consent to being relied on
b) the customer provides the prescribed third
party with explicit and informed consent to
having their customer identification information
provided to the reporting entity, and
the reporting entity:
(i) obtains the required customer identification
information from the prescribed third party
prior to the commencement of the designated
service to that customer (or in accordance with
any AML/CTF Rules made under sections 33 and
34 of the AML/CTF Act)
(ii) is able to obtain copies of the documentation
(including electronic records where applicable)
collected under the ACIP from the prescribed
third party without delay, and
(iii)remains liable under the AML/CTF Act for any
failure to comply with the CDD requirements.
(b) where the third party is outside of Australia,
the third party is subject to appropriate
regulation and similar customer identification
requirements as are applicable in Australia.
Customer identification information would include
information on the customer’s identity, beneficial
ownership, whether they are a politically exposed
person (if appropriate) and the purpose and intended
nature of the business relationship.
Prescribed third parties domiciled in Australia would be:
• authorised deposit-taking institutions such as
banks, credit unions and building societies
• licensed financial advisors providing a
designated service under the AML/CTF Act
• another member of the reporting entity’s
‘designated business group’ (as defined in the
AML/CTF Act), and
• any other entity prescribed in the Rules.
Prescribed third parties domiciled outside of Australia
are:
•
•
•
•
•
authorised financial institutions such as banks,
credit unions and building societies, or equivalent
other authorised financial service providers
(excluding remittance service providers)
licensed financial advisors, or equivalent auditors,
or equivalent
insolvency practitioners, or equivalent
accountants, or equivalent, subject to mandatory
11
REVIEW RECOMMENDATION 5.12
REFORM PROPOSAL
professional registration recognised by law, and
•
independent legal professionals, subject to
mandatory professional registration recognised
by law, or equivalent
where:
•
the prescribed third party is subject to
appropriate AML/CTF regulation and supervision
that is comparable to AML/CTF regulation and
supervision in Australia, and
•
the reporting entity has determined that it is
appropriate to rely upon the ACIP carried out by
the third party having regard to the relevant
country’s ML/TF risk.
12
2.5.2 Prohibition on providing a service if CDD cannot be performed
COMMENT: Under section 32 of the AML/CTF Act, a reporting entity must generally not provide a designated
service to a customer if the reporting entity is unable to carry out the applicable customer identification
procedure. Australia’s mutual evaluation report (MER) concluded that this requirement does not meet the FATF
standards, as the obligation is not explicit and there is no obligation for a reporting entity to consider making a
suspicious matter report (SMR) where this occurs. This proposal would address these deficiencies, making the
obligation in section 32 explicit and imposing an additional obligation to consider making a SMR.
Note that this proposal excludes sections 33 and 34 which provide an exemption to the conduct of CDD prior to
the service being provided.
PROPOSAL:
REVIEW RECOMMENDATION 5.9
REFORM PROPOSAL
The AML/CTF Act should be amended to explicitly
prohibit reporting entities from providing a
regulated service if the applicable customer
identification procedure cannot be carried out and
require reporting entities to consider making a
suspicious matter report in such situations.
2.5.2 That the AML/CTF Act be amended to make it clear
that, if a reporting entity is unable to carry out the
applicable customer identification procedure for a
customer, the reporting entity must:
•
•
not commence to provide the designated service
must not establish a business relationship, and
•
consider making a suspicious matter report in
relation to the customer.
A civil penalty provision should apply to breaches of this
requirement.
2.5.3 Cash-in-transit deregulation
COMMENT: There was support among stakeholders from the cash-in-transit sector consulted during the
statutory review to remove the collection and delivery of cash as designated services from the AML/CTF Act on
the basis that CIT operators are licensed at the state and territory level and the ML/TF risks associated with the
service is low.
PROPOSAL:
REVIEW RECOMMENDATION 4.1
REFORM PROPOSAL
The AML/CTF Act should be amended to delete the
following from table 1 of section 6:
• Item 51 (collecting physical currency, or
holding physical currency from or on behalf
of a person), and
• Item 53 (delivering physical currency to a
person).
2.5.3 That the AML/CTF Act be amended to delete the
following from table 1 of section 6:
•
Item 51, and
•
Item 53.
2.6 Correspondent banking
2.6.1 Nostro and vostro accounts
COMMENT: The report on the review of the AML/CTF regime recommended that amendments should be
introduced to simplify and clarify correspondent banking requirements. This includes clarifying the due diligence
requirements regarding nostro and vostro accounts.
13
The proposed amendments would implement the aspect of recommendation 10.1 that relates to nostro and
vostro accounts, clarifying that the requirements to perform due diligence under Part 8 only apply to respondent
banks (vostro accounts only).
REVIEW RECOMMENDATION 10.1
REFORM PROPOSAL
The AML/CTF Act and Rules should be amended to
simplify and streamline the correspondent banking
obligations to establish a one-step process for
conducting due diligence assessments on
respondent financial institutions that is consistent
with the FATF standards.
2.6.1 That the AML/CTF Act be amended to clarify that
the due diligence requirements under Part 8 of the Act
apply to respondent banks only.
2.6.2 Definition of correspondent banking
COMMENT: Stakeholders supported expanding the definition of correspondent banking. The definition of a
correspondent banking relationship under the AML/CTF Act is unduly narrow and inconsistent with international
banking practice. The current definition does not recognise other correspondent banking arrangements that
financial institutions can enter into with foreign entities which are not considered to be financial institutions for
the purposes of the AML/CTF Act. This has regulatory implications, as financial institutions that enter into
correspondent banking relationships with such foreign entities must comply with the more stringent CDD
obligations under Chapter 4 of the AML/CTF Rules for services provided under the relationship, rather than only
conducting a due diligence assessment of the foreign entity itself.
REVIEW RECOMMENDATION 10.3(b)
REFORM PROPOSAL
The AML/CTF Act should be amended to:
2.6.2 That the definition of correspondent banking under
the AML/CTF Act be aligned with the Wolfsberg AntiMoney Laundering Principles for Correspondent Banking.
Under the Wolfsberg principles, correspondent banking is
‘the provision of banking services by an authorized
institution to another institution to enable the latter to
provide services and products to its own customers’.
(a) broaden the definition of correspondent
banking in line with international
approaches that are consistent with the
FATF standards
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2.6 Cash dealers under the FTR Act
COMMENT: The proposed reform would amend the provisions of the Financial Transaction Reports Act 1988
(FTR Act) to exclude insurance intermediaries and general insurance providers - apart from motor vehicle dealers
– from the definition of a ‘cash dealer’. The amendment is proposed because services provided by insurance
intermediaries and general insurance providers (apart from motor vehicle dealers) are not considered to pose a
high ML/TF risk. 10 The repeal of the remaining provisions of the FTR Act will be completed under Phase 2.
PROPOSAL:
REVIEW RECOMMENDATION 18.2
REFORM PROPOSAL
In the repeal of the FTR Act, insurance
intermediaries and general insurance providers,
apart from motor vehicle dealers, should not retain
their reporting obligations.
2.6 That the definition of ‘cash dealer’ under section
3(c) of the FTR Act be amended to only include
motor vehicle dealers that provide insurance or act
as an insurance intermediary, and not insurance
intermediaries and general insurance providers
generally.
2.7 Designated business groups
COMMENT: Stakeholders strongly supported amending the AML/CTF Act and Rules to replace the current
definition of designated business group (DBG) with a definition that permits a joint AML/CTF program to apply to
all reporting entities within a corporate group, including corporate groups with foreign branches and
subsidiaries. The proposed definition of DBG will be included in the AML/CTF Rules, and subject to a separate
consultation process.
It is also proposed to amend the AML/CTF Act to allow DBGs to share information across multiple DBGs for
customers that are joint customers within the same corporate group for the purpose of managing ML/TF risk.
Making these amendments will enable AUSTRAC to effectively regulate and supervise reporting entities at the
group level and will also enable corporate groups to identify the ML/TF risks of reporting entities across the
corporate group.
As outlined in the discussion under Item 2.5.1, feedback is also requested on how the definition of a DBG under
the AML/CTF framework could be amended to better reflect business relationships between entities and to
enable greater use of the proposed reliance provisions. For example members of one DBG could rely on the CDD
conducted by a member of another DBG in the same corporate group.
PROPOSAL:
REVIEW RECOMMENDATION 7.5
REFORM PROPOSAL
The AML/CTF Act should be amended to allow DBGs to
share information across more than one DBG for
customers that are joint customers within the same
corporate group for the purpose of managing ML/TF
risk.
2.7.1 Amend Part 11 to include sharing of information
across more than one DBG in a corporate group to more
efficiently identity, mitigate and manage ML/TF risk across
the corporate group.
Refer also to the discussion under Item 2.5.1 above
concerning the proposed amendments to the reliance
provisions under the AML/CTF Act.
2.7.2 Amend the AML/CTF Act and Rules to enable
members of a DBG to rely on the CDD procedures
undertaken by a member of another DBG in the same
corporate group, subject to the explicit and informed
consent of the customer.
10
FATF standards only require life insurance and investment-related insurance products to be regulated and not general insurance.
15
2.8 Definitions
2.8.1 Carrying on a business
COMMENT: The proposed amendments would better target the AML/CTF regime at businesses that routinely
provide services listed under Tables 2 and 3 of section 6 of the AML/CTF Act that pose a ML/TF risk, rather than
businesses that may provide these services incidentally or on an occasional basis.
PROPOSAL:
REVIEW RECOMMENDATION 4.5
REFORM PROPOSAL
The use of the term ‘in the course of carrying on a
business’ should be qualified for the activities
currently within tables 2 and 3 of section 6 of the
AML/CTF Act to ensure that only activities
routinely or regularly provided by a reporting
entity are captured under AML/CTF regulation.
2.8.1 (a) Amend Item 1 of Table 2 of section 6 of the
AML/CTF Act to provide that the services are only
designated services when they are provided in the
course of carrying on a bullion-dealing business.
2.8.1 (b) Amend Items 1, 2, 3, 6, 9, 11, 12 and 13 to
provide that the services are only designated services
when they are provided in the course of carrying on a
gambling business.
2.8.2 Designated remittance arrangement
COMMENT: This proposal would narrow the definition of a designated remittance arrangement (DRA) and
remove any unnecessary compliance burden on entities unintentionally caught under the current definition such
as those businesses that may provide these services incidentally to another designated service.
PROPOSAL:
REVIEW RECOMMENDATION 11.2
REFORM PROPOSAL
The definition of a DRA in the AML/CTF Act should
be amended to ensure that non-remittance
businesses are not unintentionally regulated as
remitters under the AML/CTF Act.
2.8.2 Amend the definition of a DRA to cover a person or
a business operating as a remitter and exclude entities
that only provide remittance-type transactions that are
incidental to their core designated services.
2.8.3 Stored value cards
COMMENT: This proposal amends the current definition of ‘stored value card’ to include open loop cards, as
well as new products or new ways of using products, to reflect developments in the market place.
PROPOSAL:
REVIEW RECOMMENDATION 19.1(g)
REFORM PROPOSAL
The AML/CTF Act should be amended to redraft the
definition of ‘stored value card’ to provide industry
with greater guidance as to what a stored value
card can include, while remaining broad, inclusive
and sufficiently flexible to cover virtual cards.
2.8.3 That the AML/CTF Act be amended to change the
definition of a ‘stored value card’ under section 5 to
include open loop cards on which data can be encoded
directly, or stored remotely, and where the cards can be
preloaded with a fixed amount of electronic currency or
value.
The definition should not include stored value cards
that:
• do not provide automatic teller machine access
• do not allow refund through merchants, and
• can only be used at a single merchant, or
among a limited network of merchants.
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2.8.4 Signatories
COMMENT: This proposal would ensure that the term ‘signatory’ applies more narrowly under the AML/CTF
Act. Currently a store cashier can be considered a signatory to the store owner’s account if they conduct an
EFTPOS transaction through the cash register. This means the cashier is a customer receiving a designated
service.
PROPOSAL:
REVIEW RECOMMENDATION 19.2(f)
REFORM PROPOSAL
Redraft the definition of ‘signatory’ so that it more
narrowly applies to persons with authority to
authorise payment transactions.
That the AML/CTF Act be amended to narrow the
definition of ‘signatory’ for the purposes of Item 3 of
Table 1 of Section 6 so that the term ‘each other
signatory’ to the account only applies to signatories who
have control of the account, such as a person who can:
•
approve the establishment of the account, and
•
has control over who accesses the account and
the parameters of its use.
2.8.5 Investigating officer
COMMENT: The AML/CTF Act enables an ‘investigating officer’ or head of a prescribed agency to issue a section
49 notice to a reporting entity. The Integrity Commissioner from the Australian Commission for Law
Enforcement Integrity (ACLEI) is able to issue section 49 notices as the head of a prescribed agency. However, a
member of the staff of ACLEI is not able to issue section 49 notices on the Commissioner’s behalf, as they are
not included in the definition of an ‘investigating officer.’ This creates an administrative burden for the Integrity
Commissioner.
PROPOSAL:
NEW PROPOSAL
REFORM PROPOSAL
Allow ACLEI staff to issue section 49 notices under
the AML/CTF Act.
2.7.5 That the AML/CTF Act be amended to extend the
definition of an ‘investigating officer’ to include a
member of the staff of the ACLEI.
2.9 Secrecy and access
COMMENT: AUSTRAC collects a range of information to support its complementary roles as Australia’s
AML/CTF regulator and specialist financial intelligence unit (FIU). This information is collected in accordance with
the provisions of the AML/CTF Act and other Commonwealth, State and Territory legislation.
Businesses regulated under the AML/CTF regime (reporting entities) provide information to AUSTRAC primarily
through the reporting of threshold transaction reports (TTRs), international funds transfer instructions (IFTIs)
and suspicious matter reports (SMRs). Travellers and currency consigners provide reports on the movement of
physical currency and bearer negotiable instruments into and out of Australia. AUSTRAC analyses and
disseminates this information as actionable financial intelligence to partner agencies, including domestic law
enforcement, national security, human services and revenue protection agencies. These agencies use AUSTRAC
information to assist them to perform their functions.
The secrecy and access provisions under Part 11 of the AML/CTF Act regulate access to, and the use and
disclosure of, AUSTRAC information. These provisions are intended to ensure that the sensitive information
under AUSTRAC’s control is secure and protected from unauthorised access, use and disclosure.
The report of the statutory review of the AML/CTF regime made two recommendations for the reform of the
secrecy and access provisions. These are:
17
Recommendation 14.1: The Attorney-General’s Department, in partnership with AUSTRAC and in consultation with other
government agencies, should develop a simplified model for sharing information collected under the AML/CTF Act that is:
•
responsive to the information needs of agencies tasked with combating ML/TF and other serious crimes
•
supports collaborative approaches to combating ML/TF and other serious crime at the national and international
level, and
•
establishes appropriate safeguards and controls that are readily understood and consistently applied.
Recommendation 14.2: Subject to appropriate controls and safeguards, the AML/CTF Act should be amended to permit
reporting entities to disclose suspicious matter report-related information to foreign parent entities and external auditors.
Industry feedback is sought on a number of proposals being developed to implement these recommendations.
The proposals are outlined below and a number of questions posed to guide discussion
New objects for Part 11
Discussion questions
Proposal: Establish objects for the secrecy and access
provisions of the AML/CTF Act to guide interpretation.
The objects could include elements that support:
What objects should be included to help guide
interpretation?
•
•
the collection of financial intelligence
effective and efficient information-sharing to
underpin collaborative efforts to combat and
disrupt money laundering, terrorism financing,
and other serious crimes
•
enhanced information-sharing partnerships
between government and the private sector
•
robust safeguards to protect AUSTRAC
information from inappropriate and
unauthorised disclosure.
Expanded power to disseminate AUSTRAC information
Proposal: Give the AUSTRAC CEO an explicit power to
disseminate AUSTRAC information to support
increasingly collaborative approaches to combating and
disrupting serious and organised crime in Australia. This
would include a power to disseminate information to
(for example):
Discussion questions
What safeguards should be established to address the
privacy and confidentiality concerns associated with
sensitive AUSTRAC information?
•
domestic law enforcement, regulatory and
revenue agencies and taskforces at the
Commonwealth, state and territory level
• international partner agencies and multi-lateral
bodies such as INTERPOL and EUROPOL
• reporting entities and other private sector
bodies, and
• the general public, including academic and
research bodies.
The AUSTRAC CEO would only have an explicit power to
disclose AUSTRAC information for the purpose of the
performance of the functions of the CEO and limits
would apply to the disclosure of ‘sensitive AUSTRAC
information.’ In these circumstances, the AUSTRAC CEO
would need to be satisfied that the recipient has given
appropriate undertakings for:
18
New objects for Part 11
Discussion questions
• protecting the confidentiality of the information
• controlling the use of the information, and
• ensuring the information will be used only for the
purpose for which it is communicated.
Access to AUSTRAC information
Discussion questions
Proposal: Give the Minister for Justice the power to
prescribe taskforces by way of regulation for the
purposes of accessing AUSTRAC’s intelligence
database. 11
Which agencies should have direct access to
AUSTRAC’s database?
?
The current ‘designated agency’ model for accessing
AUSTRAC information does not adequately provide for
access by interagency bodies at the domestic level, such
as domestic taskforces.
Access to AUSTRAC information given to these task
forces will be in accordance with a written authorisation
by the AUSTRAC CEO outlining:
• which officials, or which class of officials, can access
AUSTRAC information, and
• what types of AUSTRAC information they can access.
Clarifying power to use AUSTRAC information
Discussion questions
Proposal: Clarify the scope of agencies’ ability to use
AUSTRAC information.
Should agencies be given an explicit power to use
AUSTRAC information?
Agencies that access AUSTRAC information do not have
an explicit power to use such information. This generates
ambiguity about the scope of an agency’s power to use
the information. To provide clarity, agencies would be
given an explicit power to use AUSTRAC information that
AUSTRAC has disseminated to them, or they have
accessed. This power to use information would then be
limited to use:
• for the purposes of the performance of the agency’s
functions and exercising the agency’s powers
• in accordance with any undertaking agreed between
AUSTRAC and the agency, and
• in accordance with any binding conditions imposed
by AUSTRAC on use.
What limitations on this power should be prescribed in
legislation?
On-disclosures of AUSTRAC information
Discussion questions
Proposal: Clarify and simplify the provisions that allow
an agency to make on-disclosures of AUSTRAC
information.
What limitations should be imposed on the ability of
agencies to on-disclose AUSTRAC information??
The provisions for the on-disclosure of AUSTRAC
information are complex and interact with each agency’s
own information disclosure provisions.
11
This is similar to the model used to prescribe taskforces to receive taxpayer information under the Taxation Administration Act 1953 and the Income Tax
Assessment Act 1936.
19
New objects for Part 11
Discussion questions
The proposal would allow an agency to on-disclose
AUSTRAC information disseminated to, or accessed by,
the agency to another Australian government agency
where:
(a) the disclosure is for the purposes of the
performance of the functions of the partner
agency, and
(b) the partner agency is satisfied that the recipient
agency has a proper interest in receiving such
information. 12
Such on-disclosures would need to be in accordance
with any undertaking agreed between AUSTRAC and the
agency and any binding conditions placed on the
information by AUSTRAC.
Information sharing with the private sector
Discussion questions
Proposal: Establish an information-sharing model that
allows AUSTRAC to disclose AUSTRAC information to
reporting entities and private sector bodies to assist
them to understand their risks and comply with AML/CTF
obligations.
The secrecy and access provisions prevent AUSTRAC
from sharing sensitive AUSTRAC information with the
private sector. This in turn limits AUSTRAC’s ability to
provide in-depth guidance to reporting entities about
current ML/TF risks and inhibits Australia from
developing a collective understanding of its ML/TF risk
profile.
The proposal would give the AUSTRAC CEO the power to
disclose AUSTRAC information to reporting entities
where the recipient has given appropriate undertakings
to:
• protect the confidentiality of the information
What safeguards should surround the disclosure of
AUSTRAC information to the private sector?
For what purposes should AUSTRAC information be
disclosed to the private sector?
•
control the use of the information, and
•
ensure the information will be used only for the
purpose for which it is communicated.
Disclosure of information to AUSTRAC
Proposal: Establish a framework that allows reporting
entities to disclose information to the AUSTRAC CEO
(outside of section 49 notices and reporting obligations).
Discussion questions
If the AML/CTF Act were to provide such an
authorisation, what restrictions should be placed on
this authorisation?
If a more collaborative approach is adopted to the
sharing of information with the private sector, it would
be useful for the AUSTRAC CEO to be able to request
information from a reporting entity. However, immunity
from liability would need to be provided to anyone
responding to such a request.
Should it be mandatory for reporting entities to
respond to these types of requests for information?
12
This is a combination of the current on-disclosure provision in section 128 of the AML/CTF Act and the on-disclosure provision in section 139 of the NZ
AML/CTF Act.
20
New objects for Part 11
Discussion questions
Tipping-off offence
Discussion questions
Proposal: Simplify the tipping-off offence and permit
reporting entities to share SMR-related information
with:
•
domestic and foreign members of their corporate
or designated business group, including parent
entities, subsidiaries and branches, and
•
external auditors
What controls and safeguards should apply to the
sharing of SMR-related information offshore?
Should the sharing of SMR-related information be
limited to countries with equivalent AML/CTF
requirements?
What groups should reporting entities be able to share
SMR-related information with?
subject to appropriate controls and safeguards.
Cross-border notification of SMRs
Discussion questions
Proposal: Permit reporting entities that have filed a SMR
with AUSTRAC to disclose to an FIU in another country
that the SMR has been filed.
This proposal will ensure that multiple countries involved
in a suspicious transaction can be alerted that an SMR
has been made.
To prevent law enforcement investigations from being
jeopardised, disclosures could be limited to just
providing, for example, a unique SMR reference number,
rather than disclosing the actual details of the SMR.
Should reporting entities be able to advise FIUs of
other countries that they have made an SMR to
AUSTRAC?
What limitations should be placed on this ability to
share SMR-related information?
Private-to-private information sharing
Discussion questions
Proposal: Permit the sharing of information between
private sector entities to empower the private sector to
work together to identify and, if necessary, report on
suspected ML/TF.
Should Australian reporting entities be explicitly able to
disclose details about customers or transactions that
formed the basis of an SMR to other reporting entities?
The USA PATRIOT Act provides a model for this type of
information sharing, permitting two or more financial
institutions and any association of financial institutions
to share information with one another regarding
individuals, entities, organisations, and countries
suspected of possible terrorist or ML activities, on a
voluntary basis, and with specific protection from civil
liability for disclosure of personal data. The shared
information may only be used to identify and if
necessary report on ML or terrorist activity. Only details
about customers or transactions which form the basis of
a SMR can be shared with other financial institutions,
provided they do not share the actual SMR or reveal the
existence of the SMR.
What controls and would be required to protect the
ongoing confidentiality and security of the underlying
information? SMR information?
What would the benefits of this proposal?
21