Employee due diligence
An employee due diligence (EDD) program documents the procedures you use to screen your employees. This is to identify and minimise your business or organisation’s exposure to the risk of money laundering and terrorism financing (ML/TF). This helps make sure that your business or organisation is not used for financial crime.
Your EDD program is part of your AML/CTF program. It must be based on your risk assessment of your business or organisation and the roles within it. It must explain your systems and controls to manage risk, including how you screen your employees and which roles you screen.
Which employees to screen
You must screen or re-screen any employee whose role means they might be able to facilitate money laundering or terrorism financing.
- prospective employees before they are employed to such a position
- existing employees before they are transferred or promoted to such a position.
How to screen employees
To screen both current and potential employees as part of your EDD program you should:
- identify them
- verify their identity
- confirm their employment history (for example through references or referee reports)
- decide whether they are suitable for the position and don’t pose a risk to your business or organisation.
If your business or organisation is regulated by another government agency in Australia which requires your employees to have a licence, you can consider whether an employee’s licence satisfies your EDD program requirements.
Some roles in your business or organisation might be higher risk than others (for example, roles with duties that might make the employee a target for collusion with, or coercion by, criminal groups). If you think this is the case, it’s a good idea to apply tougher checks. You might consider checking whether the employee:
- has a criminal record (such as through a police check)
- is or has been subject to any regulatory, court or legal action
- has used bankruptcy laws to their own advantage
- has lived in high-risk countries or regions.
Employees who don’t comply with your AML/CTF program
Your EDD program must also set out the steps you take if an employee doesn’t comply with your AML/CTF program without good reason.
This might include mandatory training to refresh their knowledge of your AML/CTF program.
You might also impose disciplinary actions on employees, depending on the seriousness of the breach. These actions might range from formal warnings to instant dismissal.
The content on this website is general and is not legal advice. Before you make a decision or take a particular action based on the content on this website, you should check its accuracy, completeness, currency and relevance for your purposes. You may wish to seek independent professional advice.