AUSTRAC has become aware of uncertainty among providers of an item 54 designated service regarding their obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
Paragraph 5.6 of AUSTRAC's guidance note Risk management and AML/CTF programs states that:
Chapter 5 of the AML/CTF Rules sets out the requirements for a special AML/CTF program, which applies where a reporting entity provides only designated services covered by item 54 of table 1 in section 6 of the AML/CTF Act. A special AML/CTF program is a written program for the sole or primary purpose of setting out the reporting entity's applicable customer identification procedures (in the AML/CTF Rules, the requirements are the same as for Part B of an AML/CTF program).
Some providers of an item 54 designated service have formed the view that Part B of an AML/CTF program only involves identifying and verifying the identity of a customer, without regard to the money laundering or terrorism financing (ML/TF) risk of the customer or the services provided.
This view is not consistent with requirements of Chapter 4 of the AML/CTF Rules in Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1). An applicable customer identification procedure involves more than the mere identification and verification of a customer. A reporting entity must have in place appropriate risk-based systems and controls to determine whether additional 'know your customer' (KYC) information should be collected from the customer and/or verified.
AUSTRAC's view is described in paragraph 37 of AUSTRAC's Public Legal Interpretation No. 2 of 2008 - Item 54 of table 1 in section 6 of the AML/CTF Act which states that:
When developing its AML/CTF program, a reporting entity should consider factors including the type of money laundering or terrorism financing (ML/TF) risk it may reasonably face. In identifying ML/TF risk, the reporting entity must consider its customer types, the types of services it offers, delivery methods and any dealings it may have with foreign jurisdictions. The risk-based systems and controls in the reporting entity's special AML/CTF program should be sufficient for the entity to determine whether and to what extent the identity details relating to a customer should be verified considering the relevant level of ML/TF risk the entity may reasonably face.
Part 4.1 of the AML/CTF Rules sets out these requirements.
In addition to customer identification requirements, providers of an item 54 designated service also have other obligations under the AML/CTF Act such as suspicious matter reporting and record keeping.
Ultimately, a reporting entity is responsible for ensuring that it complies with the requirements of the AML/CTF Act and associated AML/CTF Rules. It is a matter for a reporting entity to determine what its obligations are under the AML/CTF Act. If a provider of an item 54 designated service remains uncertain about whether the Act applies to its business, it may wish to obtain legal advice.
