The Government has released a project plan for implementing 80 of the 84 recommendations made by the Attorney-General’s Department in its statutory review of the AML/CTF Act.
The recommendations signal fundamental changes to the regime (see our previous article here).
There are five key things you need to know. Most importantly, the benefits from simpler customer due diligence may not be realised until late 2018.
1. Decisions on sanctions reforms, tranche two implementation and widening the scope of stored value card regulation will be made soon
The feasibility study into AUSTRAC becoming the sanctions regulator will be completed by December 2016. Although a more proactive regulator may signal more enforcement action, there should be significant upside for industry with clearer guidance on what is necessary to satisfy the due diligence defence and opportunities to streamline the AML/CTF and sanctions regimes.
Also due for completion in December is the decision on whether all stored value cards should be regulated (and not just those above the current dollar thresholds). The potential impacts of this for industry are significant (think gift cards) and should be watched closely.
The cost-benefit analysis of models for regulating lawyers, accountants, high-value dealers, real estate agents and others is due for completion by June 2017. This leaves the door open for other forms of regulation and means that it is unlikely that any obligations will commence before 2018.
2. AUSTRAC to be given more muscle
A raft of expanded AUSTRAC powers has been fast tracked for early 2017 and includes powers to give more remedial directions, ban individuals from running remittance businesses, and issue infringement notices for minor offences.
The power to issue infringement notices is interesting when considered in light of ASIC’s increased use of its infringement powers in recent years and is on top of AUSTRAC’s ability to seek significant penalties (up to $18 million).
3. Easier KYC may have to wait
From an industry perspective, the proposal with potentially the biggest impact is the simplification of customer due diligence and the exploration of new technologies for confirming the identity of individual customers. But this won’t happen until late 2018. Given the rate at which technology is advancing and the new solutions being developed, we would have liked to see these reforms happen sooner.
Further support for the Government’s innovation agenda could also be achieved if AUSTRAC was given greater power to add or remove designated services in response to new product developments. We encourage industry to consider this in discussions with AUSTRAC.
4. An important recommendation has been left out
Important recommendations to change definitions in the AML/CTF Act and Rules have been left out of the project plan. These clarifications of terms like “loans”, “derivatives” and “securities” are much needed and should be added to the plan.
5. This is an opportunity to co-design the law
The Attorney-General’s Department has made it clear that these reforms will be collaborative. Now is your opportunity to be involved in designing the new laws – by 2020 you will have missed your chance. The first step is to make a submission on the project plan by Friday 11 November 2016.