Are finance brokers reporting entities under the AML/CTF Act?Whether or not a finance broker is a reporting entity under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) depends on whether they are providing one or more of the designated services specified in section 6 of that Act.
What if finance brokers provide the designated service in item 54 of table 1 in section 6 of the AML/CTF Act?
Finance brokers who are holders of an Australian financial services (AFS) licence and only provide the designated service specified in item 54 of table 1 in section 6 of the AML/CTF Act, have suspicious matter reporting (SMR) obligations which commenced on 12 December 2008. Subsection 42(6) of the AML/CTF Act, which provides that Division 2 (suspicious matters) does not apply to a designated service covered by item 54, has been repealed (effective 12 December 2008) by the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2007.
Likewise, finance brokers who provide one or more other designated services and are not merely acting as agents of another reporting entity, will be obliged to report suspicious matters to AUSTRAC when the relevant provisions come into effect.
What if finance brokers act as agents for lenders?
Finance brokers acting as agents for lenders are not reporting entities under the AML/CTF Act, unless they are providing one or more of the designated services specified in that Act, outside their agency agreement.
The responsibility for reporting a suspicious matter to AUSTRAC rests with the reporting entity (lender), not the agent (finance broker). If a finance broker forms a suspicion during the course of providing a designated service as agent of the lender, or while assisting with obligations related to the provision of the service (such as carrying out the applicable customer identification procedure), the broker should disclose such suspicious matters to the lender in line with their agency agreement. This would then require the lender as reporting entity (not the agent) to decide whether the matter required reporting to AUSTRAC as a suspicious matter.
What if finance brokers are not agents for lenders but provide services for lenders under a contractual agreement?
Finance brokers who are not agents but are providing services to lenders under a contractual agreement do not have any SMR obligations under the AML/CTF Act, unless they themselves are providing one or more of the designated services specified in that Act.
How do the 'tipping off' provisions affect finance brokers acting as agents or providing a service under a contractual agreement?
Agents of lenders, or service providers for lenders under a contractual agreement, are not reporting entities and do not have any SMR obligations unless they are providing one or more designated services under the AML/CTF Act, outside their agency or contractual agreement.
There is no provision in the AML/CTF Act which exposes agents or service providers to the 'tipping off' offence in section 123 of that Act when they notify the lender of any suspicion they may have formed. Section 123 specifically applies to disclosure of information by a reporting entity.
Section 123 does not prohibit an agent or service provider from alerting the reporting entity to unusual business activity. This would then require the reporting entity to decide whether the matter required reporting to AUSTRAC.
How do the 'tipping off' provisions affect finance brokers providing one or more designated services themselves?
Section 123 of the AML/CTF Act prescribes that where an SMR obligation arises and the information about the suspicious matter has been communicated to AUSTRAC under subsection 41(2), the reporting entity must not disclose to anyone (other than AUSTRAC) that such a communication has been made. This provision is prescribed by the AML/CTF Act as the 'offence of tipping off'.
In relation to finance brokers who are providing designated services and are thus reporting entities under the AML/CTF Act, it is AUSTRAC's view that the offence of 'tipping off' is limited to explicit disclosure to anyone other than AUSTRAC that an SMR has been submitted or that the broker has formed the applicable suspicion under subsection 41(1) of the AML/CTF Act.
The mere act of asking a customer for additional information about their identity or the source or destination of their funds, for example, would not constitute 'disclosing information' under section 123 of the AML/CTF Act.