New customer due diligence obligations for transactions involving Iran
From 1 March 2012, new customer due diligence requirements apply to reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). These new obligations, which apply to all transactions involving Iran, form a component of the Australian Government's framework of countermeasures applied to Iran.
The new obligations, as set out in Chapter 15 of the Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules), require reporting entities to apply enhanced customer due diligence (ECDD) to all transactions relating to a 'prescribed foreign country'. The Australian Government, via Regulation under the AML/CTF Act, has declared that Iran is a prescribed foreign country. This means that, from 1 March 2012, reporting entities must apply ECDD in regard to all customers associated with Iran, which should entail closer scrutiny of relevant transactions and more rigorous customer due diligence checks of their customers.
How do the new obligations contribute to Australia's countermeasures framework?
As part of its international anti-money laundering and counter-terrorism financing (AML/CTF) obligations, the Australian Government is applying countermeasures to protect the Australian financial system from ongoing and substantial terrorism financing and money laundering risks originating from Iran.
There are three components of Australia's countermeasures framework:
- 'enhanced vigilance' requirements
- prohibitions on providing designated services
For reporting entities, enhanced vigilance means undertaking enhanced customer due diligence in relation to all Iran-related transactions. These enhanced vigilance requirements are set out in Chapter 15 of the AML/CTF Rules and apply to all reporting entities.
The separate prohibition requirements and associated exemptions are set out in the Anti-Money Laundering and Counter-Terrorism Financing Regulations 2008 (the AML/CTF Regulations) and are available on the ComLaw website.
When is enhanced customer due diligence required?
Every reporting entity must have an enhanced customer due diligence program as part of their AML/CTF program, and apply it in accordance with the Chapter 15 of the AML/CTF Rules when:
- it determines under its risk based systems and controls that the risk of money laundering or terrorism financing is high; or
- a suspicion has been formed for the purposes of section 41 of the AML/CTF Act; or
- it is entering into or proposing to enter into a transaction and 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 new obligations, AUSTRAC expects reporting entities to apply enhanced vigilance in situations where a party to the transaction is an individual who is physically present in Iran or is a corporation incorporated in Iran. This may include payments which are sent or received via third-party countries where the final destination of the transaction is Iran or where the transaction is initiated from Iran.
Reporting entities should note that their obligations when dealing with a prescribed foreign country are not limited to undertaking enhanced customer due diligence. Chapter 15 also specifies that reporting entities must include a transaction monitoring program in their AML/CTF program, which has the purpose of identifying any suspicious transactions. AUSTRAC expects reporting entities to treat all Iran-related transactions as high risk transactions for the purposes of their transaction monitoring systems.
When do these obligations apply?
The countermeasures Regulations commence on 1 March 2012 at which time the enhanced vigilance obligations apply.
AUSTRAC has released Guidance note 12/02: Countermeasures applied to Iran, to assist reporting entities to meet their obligations under Australia's countermeasures regime. The guidance note, which contains more information about the enhanced vigilance requirements, as well as prohibitions and exemptions, can be accessed on the guidance notes page of the AUSTRAC website.
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 Help Desk via:
Telephone: 1300 021 037
Enquiries regarding the exemptions process for countermeasures can be directed to the Department of Foreign Affairs and Trade via email to firstname.lastname@example.org or on the Department of Foreign Affairs and Trade website.