Statutory review of operation of Anti-Money Laundering laws announced

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5 December 2013 | By Michael Chaaya (Partner)

NEED TO KNOW

On 4 December 2013, the Federal Minister for Justice, Michael Keenan, announced a review of:

  • the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act);
  • the Anti-Money Laundering and Counter-Terrorism Financing Regulations 2008 (Cth) (Regulations); and
  • the Anti-Money Laundering and Counter-Terrorism Financing Rules  (Rules),

together encompassing the AML/CTF regime.

BACKGROUND

The AML/CTF regime implements Australia’s international AML/CTF obligations under the international Financial Action Taskforce’s (FATF) 40 Recommendations on AML/CTF.  A central aim of the regime is described as being the striking of a balance between efficient conduct of business and effective regulation to combat money laundering and terrorism financing.    

Section 251 of the AML/CTF Act requires a review of the operation of AML/CTF regime seven years after the commencement of that section (12 December 2006) and a report of the review to be prepared and tabled in Parliament. 

The Attorney-General’s Department is responsible for the review of the AML/CTF regime, which the Minister describes as a source for vital transaction information for following the money trail to serious and organised crime groups that profit from illegal activities.  Some examples of crimes and case studies that demonstrate the value of the reporting requirements can be found in the Typologies and case studies report 2013 released by the Australian Transaction Reports and Analysis Centre (AUSTRAC).   

The statutory review of the AML/CTF regime is set to coincide with the mutual evaluation of Australia’s AML/CTF regime by the FATF in 2014.  The findings from the FATF mutual evaluation will be taken into account in the statutory review of the AML/CTF regime.

SUMMARY

The Terms of Reference for the review are broad to ensure any view or issue raised by the industry, partner agencies and any other interested parties can be considered.  Broadly, the review will consider:

  • the operation of the AML/CTF regime and whether there is a need for the ongoing operation of the Financial Transactions Reports Act 1988 (Cth)(FTR Act)[1];
  • the extent to which the policy objectives of the AML/CTF regime remain appropriate; and
  • whether the AML/CTF regime provisions remain appropriate for achieving those policy objectives.

The Guiding Principles accompanying those Terms of Reference state the Review will be guided by principles including:

  • creating a financial environment hostile to money laundering and terrorism crime;
  • ensuring Australia meets its international obligations;
  • achieving government objectives in the most appropriate, efficient and effective manner; and
  • addressing privacy considerations appropriately.

The Attorney-General’s Department and AUSTRAC have released an Issues Paper, which outlines areas the review proposes to examine but is not intended to be exhaustive or limit the broader scope of the review provided by the Terms of Reference.  Topics raised in the Issues Paper include (without limitation):

Topic

Comments sought on

Objects of the AML/CTF Act

  • whether the objects currently expressed in section 3 of the AML/CTF Act are appropriate and relevant;
  • whether any other object should be included in that section.

Risk-based approach to regulation under the AML/CTF regime

  • whether the risk-based approach could be enhanced under the AML/CTF regime and whether a rules-based (increased prescriptive) approach would assist reporting entities;
  • the adequacy of the requirements for an AML/CTF program to assist reporting entities in mitigating and managing money laundering and terrorism financing risks.

Minimising regulatory burden

  • other available options to minimise or reduce regulatory burden on reporting entities;
  • the extent to which reporting entities currently use simplified due diligence measures.

Scope of the AML/CTF regime

  • whether the AML/CTF regime’s framework is responsive to new and emerging services and risks, particularly with growth in technology changes and off-shore service providers;
  • whether the current range of designated services is appropriate or requires enhancement;
  • how should designated non-financial businesses and professions such as lawyers, accountants and trust service providers be regulated under the AML/CTF regime.

Technology

  • the development of online identity verification systems to strengthen compliance with customer due diligence obligations;
  • ways of using technology to reduce compliance burdens.

Supervision and enforcement under the AML/CTF regime

  • whether the risk-based supervisory approach taken by AUSTRAC supports an effective AML/CTF regime and compliance;
  • the effectiveness of AUSTRAC’s communications with the industry to ensure all entities have a sound understanding of their legal obligations under the AML/CTF regime;
  • the effectiveness of AUSTRAC’s enforcement powers and any suggested alternative powers to facilitate enforcement such as an increased application of infringement notices.

Reporting obligations

  • how the transaction reporting regime can be enhanced and whether there are any issues or constraints associated with the current obligations;
  • whether reporting entities receive appropriate feedback from AUSTRAC on the benefits and value of transaction reporting.

Privacy and record keeping under the AML/CTF regime

  • whether the AML/CTF regime provides adequate provisions to allow safeguarding of personal information;
  • the extent to which technology can assist with the collection, verification and storing of personal information and the associated impact on privacy; and
  • whether the record-keeping obligations are sufficient and proportionate for AML/CTF purposes.

The following two topics are excluded from the statutory review:

  • enhancements to customer due diligence measures as this topic is the subject of an existing consultation process that commenced in May 2013 (however, the review will consider this topic to the extent that any additional issues arise from that consultation process as relevant); and
  • the AUSTRAC supervisory levy as this is the subject of a separate statutory review.

TIMING AND METHODOLOGY FOR THE REVIEW

The closing date for written submissions on matters contained in the Terms of Reference and Guiding Principles, and on the operation of the AML/CTF regime generally, is 28 February 2014.

The review will then also consider and involve:

  • face to face consultations; and
  • a consideration of the mutual evaluation by FATF in 2014.

The Review Team will then present a report to the Government, which may include recommendations for reform of the AML/CTF regime.  The Minister is expecting the report to be provided to him in 2015.

NEXT STEPS

We are available to provide you with further information or guidance about the AML/CTF regime and any of the issues raised in the Terms of Reference, Guiding Principles and Issues Paper.

Please contact a team member listed in this publication for further information.


  [1] While most transactions are reported under the AML/CTF regime, certain transactions continue to be reported under the FTR Act.  These transactions are mainly those involving cash dealers who do not provide a designated service as defined by the AML/CTF Act. 


The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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Michael Chaaya

Partner. Sydney
+61 2 9210 6627

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Joanne Dwyer

Special Counsel. Brisbane
+61 7 3228 9375

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Christine Maher

Consultant. Brisbane
+61 7 3228 9413

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