Anti-money laundering « Australian Regulatory Compliance Review from Langes+ Lawyers

May 21, 2013

AML/CTF customer due diligence review

The Attorney-General’s Department has released a consultation paper seeking views on possible enhancements to Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) customer due diligence (CDD) regime.

The AML/CTF Act and Rules set a minimum baseline for reporting entities to know their customers and beneficial owners.

Potential reforms discussed in the paper include:
• amend the AML/CTF Rules to explicitly require reporting entities to identify and take reasonable steps to verify the identity of beneficial owners for all categories of customer that are legal persons or legal arrangements, and clarify that the term ‘beneficial owner’ means the natural person(s) (individual(s)) who ultimately owns or controls a customer.
• where a customer is acting on behalf of a person amend the AML/CTF Rules to explicitly require a reporting entity to take appropriate steps to determine whether the customer is conducting a transaction on behalf of another person or third party, and accordingly identify the beneficiaries and the destination of the transaction.
• amend the AML/CTF Rules to explicitly require a reporting entity to identify and verify the settlor of a trust.
• amend the AML/CTF Rules to define the meaning of “politically exposed person”, require reporting entities to introduce appropriate risk-based controls to identify whether their customer (and beneficial owners) may be a foreign, domestic or international organisation PEP, include provision for the conduct of explicit enhanced CDD measures where the customer is a PEP, and prescribe specific measures to be taken to perform a range of enhanced CDD measures for high-risk situations.
• amend the AML/CTF Rules to include an explicit requirement that Part A of a reporting entity’s AML/CTF program must include appropriate risk-based systems and controls to ensure that the reporting entity has a reasonable understanding of the nature of the customer’s business or occupation.
• introduce a general obligation for reporting entities to keep CDD information up to date and relevant, and that risk-based systems be used to determine what CDD information should updated or verified and at what intervals.

Currently reporting entities must have in place AML/CTF programs to identify, mitigate and manage risks that a designated service it provides may involve or facilitate money laundering or terrorism financing. Before providing a service, reporting entities are required to have appropriate CDD programs in place to:
• enable them to ‘know their customers’ (KYC)
• perform ongoing customer due diligence
• monitor transactions, and
• report suspicious matters to AUSTRAC.

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Posted 21st May 2013 by David Jacobson in Anti-money laundering

March 15, 2013

AML/CTF and privacy

Businesses that are reporting entities under the AML/CTF Act are authorised by section 35A of the Act to disclose personal information of individuals for identity verification purposes.

If your business is considered to be a reporting entity for the purposes of the AML/CTF Act, it will have obligations under the Privacy Act including the requirement to comply with the National Privacy Principles, even if it is otherwise exempt from the Privacy Act.

For example, businesses with a turnover of $3 million or less are usually exempt from the Privacy Act.

But all small businesses that are reporting agencies for AML purposes are covered by the Privacy Act regardless of their annual turnover.

If your business falls into this category, the Privacy Act will only apply to personal information collected and disclosed handled for AML/CTF purposes, such as identity verification.

What do you need to do?

You should only collect the minimum amount that is necessary to meet ‘Know Your Customer’ obligations.
NPP 1 requires businesses to take reasonable steps to tell individuals why they are collecting their personal information, including whether it is required by a law, as well as how they will handle it.
In addition, organisations are required by NPP 5 to make available a privacy policy that provides anyone with general information on how personal information might be handled by that organisation.
There may be times however when it might not be appropriate to inform a customer that you have collected personal information, particularly in regard to suspicious transactions. Businesses need to consider the prohibitions in the AML/CTF Act against ‘tipping off’ customers concerning suspicious matters information.
Personal information collected for AML purposes must be kept secure.
NPP 4 also requires that organisations take reasonable steps to destroy or permanently de-identify personal information when it is no longer required.
Reporting entities also need to take reasonable steps to ensure that personal information is accurate and up-to-date.
AML information should not be used for by reporting entities for other purposes (eg marketing).

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Posted 15th March 2013 by David Jacobson in Anti-money laundering, Privacy

November 21, 2012

Austrac AML/CTF introductory training

Austrac offers some free basic but helpful e-learning courses on its website.

If you are new to this area or want to refresh your knowledge these courses are a good place to start.

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Posted 21st November 2012 by David Jacobson in Anti-money laundering

November 2, 2012

Gambling reforms and ATM limits

The National Gambling Reform Bill 2012 and associated Bills have been introduced into the House of Representatives.

The Bills require:
• new machines manufactured or imported from end of 2013 be capable
of supporting precommitment;
• all gaming machines are part of a state-wide precommitment system,
and display electronic warnings, by 2016, with longer implementation
timelines for small venues; and
• a $250 a day ATM withdrawal limit for gaming venues (other than
casinos).

The ATM withdrawal limit will apply on and after 1 May 2013 in relation to any automatic teller machine that is on any gaming machine premises, except casinos.

The Anti-Money Laundering Amendment (Gaming Machine Venues) Bill 2012 has been introduced in response to concerns from AUSTRAC about money laundering through gambling.

The bill aims to address these practices through requiring that payouts over $1,000 are made by cheque and are ‘threshold transactions’ under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 . The bill also requires that any cheques for winnings that are transferred into another name are also threshold transactions.

The Joint Select Committee on Gambling Reform has a new inquiry into the Bill.

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Posted 2nd November 2012 by David Jacobson in Anti-money laundering, Consumer Law, Financial Services

September 28, 2012

Austrac and Departing Australia Superannuation Payment

Austrac has published draft amendments to Chapter 41 of the AML/CTF Rules relating to the cashing out of low balance superannuation accounts for consultation.

The draft amendments extend the relief in the chapter to include the Departing Australia Superannuation Payment (DASP). Under DASP, temporary residents who leave Australia are entitled to cash out their superannuation benefits once they leave Australia. The draft amendments exempt reporting entities from undertaking customer identification on such persons, subject to certain conditions including:

the value of the interest is not greater than $5,000; and
no additional contributions are accepted from the member in relation to the member’s interest in the superannuation fund, ADF or RSA; and
the whole of the interest of the member in the superannuation fund, ADF or RSA is cashed out; and
the account in which the interest of the member was held, is closed as soon as practicable after the cashing out of that interest.

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Posted 28th September 2012 by David Jacobson in Anti-money laundering, Superannuation

September 12, 2012

Austrac Remittance Sector Register

Under the AML/CTF Act, it is an offence to provide designated remittance services if an individual or business is not registered with AUSTRAC.

Registrations are issued for a set period and businesses must reapply for registration every three years.

The Remittance Sector Register is currently available as a PDF document and can be downloaded here.

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Posted 12th September 2012 by David Jacobson in Anti-money laundering

August 24, 2012

Autonomous sanctions: Syria and Iran

The Autonomous Sanctions Amendment Regulation 2012 (No. 1) was registered on 20 August 2012.
This regulation amends the Autonomous Sanctions Regulations 2011 to implement .

It amends the Autonomous Sanctions Regulations 2011 by imposing additional autonomous sanctions measures in relation to Iran and Syria and prohibiting, amongst other things, an Iranian or Syrian financial institution setting up a representative office, branch or subsidiary in Australia, or acquiring or extending an interest in an Australian financial institution and a financial institution establishing a joint venture, correspondent banking relationship or even a bank account with an Iranian or Syria financial institution, or setting up a representative office, branch or subsidiary in Iran or Syria.

It also prohibits the supply, sale or transfer to Iran and Syria of equipment and technology for the oil, gas or petrochemical industry or any transaction relating to gold, precious metals and diamonds.

Under the Autonomous Sanctions Act 2011 (Cth), Australia implements autonomous financial sanctions targeting situations of concern in Burma, Syria and Zimbabwe, and supplementing United Nations Security Council financial sanctions in relation to the Democratic People’s Republic of Korea, Iran and Libya. Australia has also implemented autonomous financial sanctions against individuals associated with the former Milosevic regime in the former Federal Republic of Yugoslavia.

It is an offence to contravene a sanction.

For bodies corporate, each of the above offences are of strict liability, unless the body corporate can prove that it took reasonable precautions, and exercised due diligence, to avoid contravening the law in question.

The penalty upon conviction for these offences is :

•for individuals: a maximum 10 years’ imprisonment or a maximum fine of 3 times the value of the transaction in breach of sanctions (if this can be calculated) or A$275,000 whichever is the greater.
•for bodies corporate: a maximum fine of 3 times the value of the transaction in breach of sanctions (if this can be calculated) or A$1.1 million, whichever is the greater.

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Posted 24th August 2012 by David Jacobson in Anti-money laundering, Compliance

August 20, 2012

New AML designated service: roll-overs to SMSFs

Treasury has released for public consultation an exposure draft of The Tax Laws Amendment (2012 Measures No. 5) Bill 2012: Roll-overs to self managed superannuation funds which amends the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act).

The amendment provides that a new designated service be included at Table 1 of section 6 of the AML/CTF Act to capture the roll-over of funds from a superannuation fund that is not an SMSF (the transferring fund) to an SMSF (the receiving fund).

It is intended that this amendment will have the effect of requiring the transferring superannuation fund to comply with a range of obligations under the AML/CTF Act.

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Posted 20th August 2012 by David Jacobson in Anti-money laundering, Superannuation, Tax

August 17, 2012

Standard Chartered settles NY money laundering charges

The New York State Department of Financial Services has announced that Standard Chartered Bank has agreed to pay a civil penalty of $340 million for alleged money laundering breaches.

The settlement follows allegations in a show cause order which accused the bank of unlawful trades valued at $250 billion for Iranian clients.

The NY action has created trans-Atlantic regulatory tensions.

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Posted 17th August 2012 by David Jacobson in Anti-money laundering, Financial Services

August 12, 2012

ASIC v Ingleby: AWB penalty

In Australian Securities & Investments Commission [ASIC] v Ingleby [2012] VSC 339 Judge Robson of the Supreme Court of Victoria made a declaration of contravention under s 1317E(1) of the Corporations Act in respect of one admitted contravention by former Australian Wheat Board Chief Financial Officer Paul Ingleby and banned him from managing a corporation until the end of 2012 and fined him $10,000 for his involvement in co-authorising payments by AWB in breach of the Oil For Food Program administered by the United Nations.

UPDATE 27 August: ASIC has announced its intention to appeal the penalty decision.

UPDATE 19 March 2013: The Victorian Court of Appeal has increased the penalties imposed against Mr Ingleby to a pecuniary penalty of $40,000 and disqualification for a period of 15 months.

Judge Robson applied the same principles he discussed in ASIC v Lindberg (discussed here).

Interestingly, in contrast to Lindberg’s penalty, he did not accept ASIC’s penalty recommendation under the circumstances: “I find that the agreed period of disqualification and pecuniary penalty broadly speaking are too severe and fall outside the permissible range that are appropriate in all the circumstances to Mr Ingleby’s contravention of the Act. ”

Judge Robson decided that “Mr Ingleby’s contravention was not one of dishonesty or lack of integrity, nor was it one of some degree of wilful blindness. Mr Ingleby says that his contravention must be seen in the context of the many duties he was required to perform in the structure of AWB. …

Mr Ingleby accepts that he failed to ‘join the dots’. It is not alleged, however, that he was actually told in a face-to-face meeting of the details of how inland transport fees were paid nor is it alleged that he had actual knowledge of what was going on or that he was directly advised by officers of AWB. The auditors did not raise these matters with Mr Ingleby. ..

Mr Ingleby accepts, however, that had he ‘joined the dots’ and with the benefit of hindsight, he would have appreciated that AWB was acting in breach of the OFFP and therefore in breach of UN resolutions. ”

Judge Robson took account of Ingleby’s contrition and that the proceedings commenced in 2007. He did not file a defence and co-operated fully.

ASIC is reviewing its position.

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Posted 12th August 2012 by David Jacobson in Anti-money laundering, Compliance, Corporations Act