The Australian Government has proposed a new legislative regime to combat money laundering and terrorism financing.

The regime is comprised of:

• the Anti-Money Laundering and Counter-Terrorism Financing Bill 2005 (Cth)
• regulations under the Bill
• mandatory Anti-Money Laundering and Counter-Terrorism (AML/CTF) Rules, developed by the Australian Transaction Reports and Analysis Centre (AUSTRAC).

The regime is intended to help bring Australia into full compliance with the international AML/CTF obligations set down by the Financial Action Task Force and various treaties and conventions.

Current status

The Bill and some draft Rules and Guidelines were released for public comment in December 2005. Submissions on the new regime are due on 13 April 2006. The Government has not yet set down a commencement date for the regime.

Who will be covered by the AML/CTF regime?

The new regime will cover a broad range of businesses (reporting entities) that provide designated services, which include many financial and finance-related services, gambling services and bullion dealing. It will apply to services provided in Australia and also by foreign branches and subsidiaries (with some exceptions).

What will a reporting entity’s obligations be?

A summary of the principal obligations on reporting entities follows.

Customer due diligence

Under the new regime, a reporting entity will be required to verify a customer’s identity before providing a designated service. There are exceptions applying to, for example, existing customers and low risk customers. There will also be an obligation to re-verify identity in certain circumstances set out in the AML/CTF Rules.

Each reporting entity will also need to set up a risk-based ongoing customer due diligence program, which:

• updates the minimum “Know Your Customer” information throughout the course of the relationship and obtain additional information as required
• assigns each customer a risk classification
• monitors transactions
• provides for an enhanced customer due diligence program for certain high-risk customers, including politically exposed persons.

Reporting to AUSTRAC

Reporting entities will be required to lodge with AUSTRAC reports of:

• suspicious matters
• specified threshold transactions (A$10,000 or more in cash or e-currency) relating to designated services
• international funds transfer instructions.

Anti-money laundering/counter-terrorism financing programs

Reporting entities will need to develop, maintain and comply with AML/CTF programs that provide for:

• anti-money laundering/counter-terrorism financing risk identification and mitigation systems
• customer due diligence systems (see above)
• systems to ensure reports that need to be lodged with AUSTRAC (see above) are lodged
• employee due diligence programs
• risk awareness training programs for employees
• compliance programs
• third party due diligence programs
• independent and regular review.

Other obligations

• Correspondent banking relationships: initial and ongoing due diligence and a written agreement required.
• Funds transfers instructions where one or more institutions are involved, the transfer must include certain originator information.
• Remittance service providers must advise AUSTRAC of prescribed information regarding identity and services.
• Cross-border movements of currency and bearer negotiable instruments must be reported in specified circumstances.

What should you do now?

The new anti-money laundering/counter-terrorism financing regime is on its way. Businesses need to follow a three-step process.

• Learn how the regime will affect your particular business.
• Write submissions with suggested amendments to the regime before 13 April 2006.
• Start preparing for the commencement of the regime.