In 2006, the Federal Government introduced the Anti- Money Laundering and Counter Terrorism Financing Act 2006 (Cth) (the Act). The Act aims to, in general terms, address the money laundering and terrorism financing risks presented by rapidly developing payment technologies.
Operating in conjunction with the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (the Rules), and the Anti- Money Laundering and Counter-Terrorism (Iran Countermeasures) Regulation 2014 (together, the AML/CTF Laws), the Act requires “reporting entities” which include providers of off-course, account based Australian licensed wagering services (wagering operators), to take a risk-based approach to money laundering and terrorism financing issues in the operation of their businesses. In other words, entities that have obligations under the AML/CTF Laws are required to identify potential risks of money laundering and terrorist financing and develop and implement strategies to mitigate these risks.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia’s anti-money laundering and counter-terrorism financing regulator and specialist financial intelligence unit and provides financial intelligence to Australian law enforcement and government agencies.
Particularly because of the high value, volume and frequency of the transactions processed by wagering operators, as well as the reduced transparency of transactions conducted over the internet and telephone, it is not surprising that wagering services are “designated services”1 under the Act and that the providers of these services are “reporting entities” and therefore have responsibilities under the AML/CTF Laws.
For example, “reporting entities” are required to:
- enrol with AUSTRAC;
- conduct customer identification and verification procedures;
- establish and maintain an AML/CTF Program;
- conduct ongoing customer due diligence and reporting; and
- meet record keeping obligations.
- A summary of the key obligations on wagering operators under AML/CTF Laws is set out below.
All wagering operators must be entered on the Reporting Entities Roll within 28 days of commencing the provision of gambling services to customers.2
To enrol, operators are required to submit a “Business Profile Form to AUSTRAC” and provide details about their business including the number of employees, annual earnings, and the services they will be providing.
Reporting entities must ensure that their enrolment details are kept up to date at all times.
All wagering operators must develop and implement an AML/CTF Program.3 An AML/CTF Program must address the money laundering and terrorism financing risks that may arise in the provision of the specific services to be provided by the wagering operator, with consideration given to the nature, size and complexity of their business.
As part of their AML/CTF Program, a reporting entity must set out, in detail, their internal policies and procedures to ensure compliance with their obligations under the AML/CTF Laws. They are also required to report to AUSTRAC on the performance and effectiveness of these mechanisms (see below under the Reporting Obligations heading).
Customer identification and verification
Under the AML/CTF Laws, a wagering operator must conduct customer identification and verification procedures within 90 days4 of a customer opening an account with the operator.5 During this time, a wagering operator is permitted to provide wagering services to the customer; however, the customer is unable to withdraw funds from their account until their identity has been verified.
The information required to verify the identity of a customer is referred to as “Know Your Customer” information, and includes the full name of the customer, their date of birth, and their residential address. Additional information is required under the AML/CTF Laws in respect of particular categories of customers, including, for example, customers that meet the definition of a “politically exposed person”.
If a wagering operator assesses an individual customer as being of medium or lower risk, the reporting entity has the option of using documentation-based or electronic- based ‘safe harbour’ customer identification and verification procedures. An example is the Commonwealth Government’s Document Verification Service. Wagering operators who employ this practice are therefore granted a ‘safe harbour’.
When collecting Know Your Customer information, wagering operators must obtain consent from their customers to collect, use and disclose a customer’s personal information for the purpose of complying with the AML/CTF Laws. This is a requirement of Australian privacy law.
Wagering operators must also submit various reports to AUSTRAC. Some of the key reports for wagering operators include;
- compliance reports, which require reporting entities to submit an annual analysis of the effectiveness of the entity’s AML/CTF Program;
- threshold transaction reports, that contain information about transactions which involve the transfer of currency to the value of AUD $10,000 or more; and
- suspicious matter reports, which require reporting entities to submit a suspicious matter report to AUSTRAC if they suspect, on reasonable grounds, that a person is or is likely to be acting fraudulently or otherwise is involved in money laundering or terrorism financing.
Wagering operators must also keep records of all transactions6, electronic funds transfers7, customer identification procedures8, AML/CTF Programs9, and due diligence assessments conducted by the operator.10
Generally, all records must be kept for seven years after they are created.
AUSTRAC and Tabcorp
On 22 July 2015, AUSTRAC initiated court proceedings against three Tabcorp group companies, TAB Limited, Tabcorp Holdings Limited and Tabcorp Wagering (Vic) Pty Limited (together, Tabcorp).11
AUSTRAC is alleging over 100 separate instances of “extensive, significant and systemic non-compliance”12 with the Act and seeks the maximum pecuniary penalty of $17 million.13
Prior to initiating proceedings against Tabcorp, AUSTRAC had not taken court action against any entity for failure to comply with AML/CTF Laws. Instead, AUSTRAC’s enforcement comprised primarily of the issue of infringement notices and fines.
The hearing of the matter in the Federal Court is scheduled for September 2016.
Particularly because of the willingness of AUSTRAC to enforce AML/CTF Laws using court action, all Australian licensed wagering operators should ensure that they are aware of, and comply with, their obligations under AML/CTF Laws.