What are the new anti-money laundering and counter terrorism financing reforms?
The purpose of the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (AML | CTF Act) is to detect and prevent money laundering and terrorism financing.
By establishing an 'audit trail' organisations can provide evidence linking criminal acts and their organisers. These audit trails produce vital leads in the detection and investigation of criminal activities.
What is money laundering?
Money laundering describes the way some criminals use the legitimate financial system to hide or disguise the proceeds of crime. By distancing themselves and the money from the criminal activity that generated them, criminals are able to use these funds for future criminal activity or in legitimate business.
Legitimate businesses can mistakenly get caught up in these activities because of the key role they play in handling financial transactions.
Why were anti-money laundering and counter-terrorism financing reforms needed?
It is estimated that up to $4.5 billion is involved in money laundering in Australia every year. With the continual advancement of technology the risks of money laundering are increasing and accordingly Australia's anti-money laundering laws needed to be updated. The new laws allow businesses to adapt their procedures to meet ongoing changes in the international security and commercial environment which means businesses can ensure their systems keep pace with technological advancements.
How will business be affected?
The AML | CTF Act imposes obligations on businesses or individuals offering specific services that could be exploited to launder money or to finance terrorism. These requirements are being introduced in two stages:
- Tranche one, which came into force in December 2007, required the financial services sector, gambling service providers and bullion dealers to comply with the Act
- Tranche 2, which is expected to come into play in early 2009 will require real estate agents, legal, accounting and trust firms, and dealers in precious metals and stones to comply.
These businesses are required to undertake AML | CTF obligations when they provide designated services. Examples include:
- opening an account
- accepting money on deposit
- making a loan
- issuing a debit card
- issuing travellers' cheques, and
- sending and receiving instructions on electronic funds transfers.
What are the new requirements under the AML/CTF Act?
Businesses are required to:
- monitor customer transactions during the provision of a designated service
- apply existing significant cash transaction reporting obligations to some non-cash transactions such as e-currency
- supply originator information in domestic and international funds transfer instructions
- report movements of bearer negotiable instruments to AUSTRAC if requested to do so by a police or customs officer
- comply with an expansion of existing 'suspicious transaction' reporting obligations to 'suspicious matter' reporting as not all designated services under the AML/CTF Act involve transactions
Reporting entities are required to develop 'risk-based' systems and controls which will allow industry the flexibility to adapt to risks that change over time.
