The Australian Government has made a number of changes to anti-money laundering and counter-terrorism financing (AML/CTF) countermeasures that impact reporting entities.
There are now two countries that have been declared as ‘prescribed foreign countries’ under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act): Iran and the Democratic People’s Republic of Korea (the DPRK, or North Korea).
The prohibition on processing financial transactions valued at AUD20,000 or more without prior authorisation, involving persons in Iran, has now been removed. The impact of these changes is explained below.
What are AML/CTF countermeasures?
As part of its international AML/CTF obligations, the Australian Government may apply countermeasures against prescribed foreign countries. These measures are to protect the Australian financial system from ongoing and substantial terrorism financing and money laundering risks that originate overseas.
Which countries are subject to AML/CTF countermeasures?
Iran and the DPRK have been declared as ‘prescribed foreign countries’ under the AML/CTF Act. This declaration commenced on 27 February 2016.
This declaration was made under the Anti-Money Laundering and Counter-Terrorism Financing (Prescribed Foreign Countries) Regulation 2016.
What obligations do reporting entities have in relation to ‘prescribed foreign countries’?
Obligations for reporting entities dealing with a prescribed foreign country are set out in Chapter 15 of the Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules).
The Rules require reporting entities to apply enhanced customer due diligence (ECDD) with regard to all customers associated with a prescribed foreign country. These ECDD obligations are described in more detail below.
Is there a prohibition on dealing with a prescribed foreign country?
The AML/CTF Regulations in force from 27 February 2016 do not prohibit reporting entities from dealing with a prescribed foreign country.
This means the prohibition on processing financial transactions valued at AUD20,000 or more without prior authorisation, involving persons in Iran, has now been removed.
As Australia’s AML/CTF regime operates in parallel with Australia’s sanctions regime, reporting entities should refer to the Department of Foreign Affairs (DFAT) website for information on existing prohibitions under Australian law when dealing with Iran and the DPRK.
Every reporting entity must have an enhanced customer due diligence program as part of their AML/CTF program.
Reporting entities must apply their program when they enter into, or propose entering into, a transaction where a party to the transaction is physically present in, or is a corporation incorporated in, a prescribed foreign country.
If any of the above situations occur, a reporting entity must undertake certain actions including the assessment of 'know your customer' information they have collected about the customer and subsequently verified. The reporting entity must then determine what information they need to clarify, update or obtain about the customer or the nature of the customer's business with the reporting entity.
Under the countermeasures obligations, AUSTRAC expects reporting entities to apply enhanced vigilance where:
- one of the parties to the transaction is a resident of Australia, or enters into a transaction in the course of carrying on an activity or business at or through a permanent establishment of the party in Australia; and
- the other party, or any of the other parties, is an individual who is physically present in Iran or the DPRK, or is a corporation incorporated in Iran or the DPRK.
This may include payments sent or received via third-party countries where the final destination of the transaction is Iran or the DPRK, or where the transaction is initiated from Iran or the DPRK.
The AUSTRAC compliance guide details a reporting entity’s ongoing customer due diligence obligations, including requirements relating to enhanced customer due diligence programs.
Which international transactions should be monitored as high-risk transactions?
Chapter 15 of the AML/CTF Rules specifies that reporting entities must include a transaction monitoring program in their AML/CTF program, to identify any suspicious transactions.
AUSTRAC expects reporting entities to treat all transactions associated with Iran or the DPRK (as prescribed foreign countries) as high-risk transactions for the purposes of their transaction monitoring systems.
The AUSTRAC compliance guide details a reporting entity’s ongoing customer due diligence obligations, including transaction monitoring program obligations.
Part 9 of the AML/CTF Act allows regulations under the Act to impose countermeasures that regulate or prohibit transactions with residents (including companies) of Australia and individuals physically present in a prescribed foreign country. There are currently no regulations prohibiting such transactions.
The previous prohibition on processing financial transactions valued at AUD20,000 or more without prior authorisation, involving persons in Iran, ceased on 27 February 2016 with the repeal of the Anti-Money Laundering and Counter-Terrorism Financing (Iran Countermeasures) Regulation 2014.
The AUSTRAC compliance guide details a reporting entity’s ongoing customer due diligence obligations, including obligations when dealing with a prescribed foreign country.
AUSTRAC officers are able to assist reporting entities, their staff and the public in providing general information relating to the AML/CTF Act.
Enquiries can be directed to the AUSTRAC Contact Centre via:
- Telephone: 1300 021 037
- Email: firstname.lastname@example.org
The Department of Foreign Affairs and Trade (DFAT) website has more information on Australia’s sanctions regime.