It is estimated that up to $4.5 billion is involved in money laundering in Australia every year. With increased technological advances, this figure is predicted to rise even further.
The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) came into effect on 12 December 2006. This legislation is part of a reform process that aims to protect industry, business and individuals against criminal activities such as money laundering, drug trafficking, arms dealing, child pornography, people smuggling, fraud, terrorism and tax evasion.
Both businesses and individuals benefit from Australia's strong financial infrastructure and international reputation as a secure financial centre. It is the ongoing responsibility of government, industry and individuals to work together to ensure it remains this way.
Will AUSTRAC verify the risk-based approach developed by each reporting entity?
AUSTRAC will pursue a supervisory program that incorporates the requirements stipulated under the AML/CTF Act and AML/CTF Rules. During an on-site assessment, consideration will be given to the entity's overall plan, approach to program development, and program implementation. In doing so, AUSTRAC will have regard to the robustness of a reporting entity's risk assessment process, including how it was undertaken and will continue to be undertaken as changes occur in the reporting entity's business or the environment in which it operates. AUSTRAC will draw from its own experience and that of the entity's industry peers to evaluate program adequacy.
Are reporting entities required to produce documentation to AUSTRAC verifying they have complied with their AML/CTF program?
During an on-site assessment, AUSTRAC may request records or other information sources to verify that an entity's policies and procedures are being properly implemented and that entity is complying fully with the AML/CTF Act and AML/CTF Rules. Additionally, AUSTRAC supervisors will interview employees of the reporting entity to obtain information about the AML/CTF processes and procedures they have in place to meet their obligations. AUSTRAC may also have regard to the work undertaken by a regulated entity's own independent internal review or audit program that ensures the entity is complying with its obligations, and the outcome of any such reviews.
How are reporting entities affected if they use a third-party service provider to undertake all or some of their AML/CTF obligations?
Under a risk-based system, entities need to use their own judgement about appropriate ways to meet their regulatory obligations under the AML/CTF Act. It is a commercial matter for reporting entities to determine whether and to what extent they will utilise another entity to carry out any of their AML/CTF Act requirements.
Reporting entities using outsourced service providers or agents are responsible for ensuring that any third party has the facilities and functions that enable the entity to comply with its requirements under the AML/CTF Act. The entity itself retains responsibility for compliance.
Where the third party is not a reporting entity, AUSTRAC does not have the power to inspect their premises. Instead, AUSTRAC will review the reporting entity's due diligence process to satisfy itself that the reporting entity has taken steps to ensure it will be continually complying. In some instances, a reporting entity may come to an agreement with an agent that the agent retain certain records. If AUSTRAC requests to inspect records held by the agent, the reporting entity will be responsible for obtaining those records from the agent.
What does a risk-based AML/CTF regime mean for small business?
Small businesses are able to develop their own compliance procedures and processes tailored to the specific risks faced by the business, allocating resources accordingly to counter those risks.
A high-risk business is one that provides services that can be easily exploited for money laundering and terrorism financing purposes and may include opening of accounts, international transfers of money, remittance services, selling stored value cards, taking bets at the race track and providing casino gambling services.
How will AUSTRAC work with small business?
As the AML/CTF regulator, AUSTRAC is responsible for promoting compliance with the AML/CTF Act and the Financial Transaction Reports Act 1988. To this end, AUSTRAC will assist small businesses to understand their obligations under the legislation through:
- education visits
- provision of information updates and resources on our website
- information sessions and workshops
- Help Desk telephone and email services
- compliance monitoring to assess and encourage compliance.