Australia awaits new Anti-Money Laundering Reforms

22 September 2005

---

Australia’s long awaited anti-money laundering reforms are now expected to be released in the form of a draft bill in October 2005. The financial services industry has participated in a series of roundtable discussions with the Minister for Justice and Customs, Senator Chris Ellison and there will be only a limited opportunity for further consultation before the release of the draft bill.

Consistent with the Federal Government’s commitment to adhere to 40 Recommendations of the Financial Action Task Force (FATF), the draft bill can be expected to build on the obligations imposed on cash dealers and account institutions under the existing Financial Transaction Reports Act 1988. The reporting obligations under these laws have long been concerned with identifying tax evasion and the proceeds of crime and post September 11, they have been expanded as a measure to counter the financing of terrorism.

Critically, the concept of "cash dealer" is likely to be expanded such that the new AML laws will have general application to the financial services industry. Moreover, categories of non-financial businesses and professions such as casinos, real estate agents, dealers in precious metals and stones, trust and company service providers, lawyers, notaries and other independent legal professionals and accountants will be subject to many of the obligations imposed on the financial services industry.

This broadening of the application of Australia’s anti-money laundering laws necessitates a flexible risk based approach to regulation rather than the prescriptive approach which has been applied to cash dealers in the past. It follows that the bill is unlikely to contain much of the detail required to build a compliance program. This will not be known until the completion of regulations, rules, guidelines and operating procedures which will be developed in consultation with industry to fit circumstances according to the risks presented.

Organisations affected by the new laws should be carefully considering the implications the new laws will have in the management of the customer relationship and transaction data. One of the greatest challenges will be the new obligation to have in place suitable measures to undertake ongoing due diligence of a customer’s transactions. The creation of new customer relationships will be subject to new identification requirements and customers who are politically exposed persons are likely to be subject to additional scrutiny.

It remains to be seen whether the financial services industry will be successful in persuading the Federal Government to establish a national identity card or other electronic identification system to compliment the new AML regime.

Corrs AML team

Corrs has regulatory specialists across the financial services sector who have many years experience in advising on Australia’s current AML regime and who have been actively involved in the consultation process for the pending reforms.

If you would like to receive the Corrs Anti-Money Laundering Update which includes a comprehensive overview of the status of the reforms, please send an email (simply insert "AML Update" in the subject heading) to corrs.bankfinance@corrs.com.au and a copy will be forwarded to you.