NEED TO KNOW

Ahead of the full statutory review of Australia’s anti-money laundering and counter-terrorism financial laws, the AUSTRAC Chief Executive Officer has amended the Anti-Money Laundering/Counter-Terrorism Financing Rules (AML/CTF Rules) in relation to the Customer Due Diligence (CDD) requirements.

The Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2014 (No 3) (Amendment Instrument) was registered on 19 May 2014, amending the AML/CTF Rules to create new CDD requirements.

In summary, the amendments will require from 1 June 2014:

  • collation and verification of information about the settlor of any trust that is a customer;
  • identification of the beneficial owner of a customer; and
  • additional CDD obligations regarding any politically exposed persons (PEPs).

BACKGROUND

The reforms contained in the Amendment Instrument had been subject to public consultation. In response to recommendations made by the Financial Action Task Force (FATF), the Government released for public consultation between May 2013 and September 2013 a discussion paper,Consideration of possible enhancements to the requirements for customer due diligence.

The FATF identified certain deficiencies relating to the CDD requirements under Australia’s AML/CTF regime, including the lack of any requirements to:

  • take reasonable measures to understand the ownership and control structure of a customer;
  • identify and verify the beneficial owners of a customer;
  • identify and verify the settlor of a trust;
  • take specific additional measures for customers (or beneficial owners of those customers) who are PEPs; and
  • collect information on the purpose and intended nature of the business relationship.

Following receipt of stakeholder submissions in relation to the discussion paper, a draft Amendment Instrument was released for consultation between 9 December 2013 to 24 January 2014. 

AUSTRAC notes a third revised version of the draft Amendment Instrument was released for public consultation in March 2014 with submissions not requiring any further changes. This version is now the finalised and registered Amendment Instrument. 

SUMMARY

The Amendment Instrument includes (without limitation) the following substantive amendments to the following chapters of the AML/CTF Rules:

Please click here to view table.

The Amendment Instrument also makes amendments to privacy notices contained in the AML/CTF Rules and to the definitions of "certified copy" and "certified extract" contained in Chapter 1.

TIMING AND REFORM IMPLEMENTATION

The amendments relating to CDD will commence on 1 June 2014 with an implementation period extending to 31 December 2015.

There are policy principles[1] in place to provide an assisted compliance implementation period. The principles are designed to provide comfort to reporting entities that certain enforcement actions (such as the application for a civil penalty order or an injunction) will not be taken by AUSTRAC during the implementation period for breaches of the new CDD requirements if the entity (or its designated business group if the entity is a member of such a group) has taken reasonable steps to implement the new requirements during the implementation period. These steps may include:

  • complying with the new CDD requirements as soon as practicable in relation to persons who become a customer between 1 June 2014 and 1 January 2016; and
  • establishing a transition plan before 1 November 2014, sufficiently resourcing and monitoring the implementation of the plan.