The Australian Transaction Reports and Analysis Centre (AUSTRAC), Australia’s financial crime regulator, recently released draft Anti-Money Laundering and Counter-Terrorism Financing Rules (Draft Rules) and is seeking industry input on the Draft Rules as part of a public consultation. The deadline for submissions to AUSTRAC is 11 March 2021.
If passed, the Draft Rules will further support the recent amendments and will give effect to recommendations from a 2015 report by the Financial Action Task Force (FATF) and a 2016 statutory review of the AML/CTF Act.
The Draft Rules include measures intended to develop Australia’s capabilities to address money laundering and terrorism financing risks and represent considerable developments in Australia’s corporate regulatory landscape relevant to domestic and cross-border businesses alike. Key changes that the amendments intend to produce are summarised below.
Summary of proposed changes
The Draft Rules propose to amend the following chapters of the current Anti Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1):
- Chapter 3 – Correspondent banking
- Chapter 6 – Customer identification and verification
- Chapter 7 – Reliance on customer identification carried out by another reporting entity
- Chapter 10 – Gambling services
Changes to correspondent/relationship banking
The Draft Rules will introduce clearer prohibitions against financial institutions entering into a correspondent banking relationship with another financial institution that allows its accounts to be used by a shell bank. These changes are targeted at financial institutions such as Authorised Deposit-taking Institutions (ADIs), banks, and credit unions. In addition, the amendments would also require banks to conduct due diligence assessments before entering into, and for the duration of, any correspondent banking relationship.
Customer due diligence/identification and verification changes
The Draft Rules also seek to clarify the requirement for reporting entities to complete the applicable customer identification procedure (ACIP) before providing a designated service. Further reforms seek to address the set of circumstances in which businesses can rely on customer identification by another reporting entity.
Suspicious Matter Reporting
AUSTRAC has also indicated that there will be amendments to provisions relating to the operation of suspicious matter reports (SMRs) and the obligations attaching to the treatment of SMRs and information gathering in relation to the verification of customers.
Responding to the Reforms
AUSTRAC is inviting industry consultation on the amendments until 11 March 2021. Once implemented, it is intended that a transition period for businesses to implement the reforms will be introduced and that additional guidance will be provided during this time.
The proposed amendments continue the process of implementing the 2012 FATF recommendations (recently updated in October 2020), which have guided the amendments to AML and CTF laws over the last few years. Many of the recommendations made in the comprehensive and highly critical FATF Report remain outstanding, however. For instance, as yet Australia has yet to follow the lead of the UK, New Zealand, Canada, Singapore, Hong Kong and Malaysia to extend AML and CTF regulations to “designated non-financial business and profession sectors” – i.e. lawyers, accountants and real estate agents (amongst others). It remains to be seen whether, and when, this will occur.