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

February 2, 2012

Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2012 (No. 1)

The Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2012 (No. 1) commenced on 1 February 2012.

The amendments include:

Amendments to Chapters 8 and 9 require reporting entities to expressly state in their AML/CTF Part A programs what obligations they have under the AML/CTF Act, and specify the appropriate systems and controls which they have implemented in regard to those obligations. Reporting entities have discretion in how they detail the description of the systems and controls which they have put in place, however, they must be an ‘appropriate’ response to the money-laundering/terrorism-financing risk which the reporting entity has identified. There was previously no requirement in Chapters 8 or 9 that reporting entities should list the reporting obligations which specifically apply to them under the AML/CTF Act.
Amendment of Chapter 28: Chapter 28 now provides an exemption from conducting the applicable customer identification procedure for transferring customers following a voluntary transfers of business under the Financial Sector (Business Transfer and Group Restructure) Act 1999.
New Chapter 67 provides an exemption from the applicable customer identification procedure in regard to ‘warrants’. A warrant is a financial instrument issued by banks and other institutions and traded on the Australian Stock Exchange. AUSTRAC has accepted industry representations that, at the time of the warrant reset, there is currently a duplication of customer identification by reporting entities. This is because the warrant holder would already have been identified under the AML/CTF Act when the warrant was purchased. Accordingly, Chapter 67 specifies that relevant reporting entities are exempt from customer identification, subject to certain conditions, thereby removing the duplication.
As a result of the amendments to Chapter 51, transactions which are currently not reportable between PayPal Australia and PayPal US and PayPal Singapore will now be reported to AUSTRAC under Chapter 16. The reporting anomaly has arisen because PayPal Australia does not supply reports to AUSTRAC about IFTIs under Chapter 17 of the AML/CTF Rules, but instead reports under Chapter 16 as it is an ADI. Therefore PayPal Australia transactions with PayPal Europe are reported under Chapter 16 as PayPal Europe is a ‘financial institution’ because it is a bank licensed in Luxembourg.

The Anti‑Money Laundering and Counter‑Terrorism Financing Rules Instrument 2007 (No. 1) (compiled up to 11 January 2012 but excluding the above amendments) can be downloaded here.

Print This Post

Posted 2nd February 2012 by David Jacobson in Anti-money laundering

Comments (0)

January 12, 2012

Who must pay AUSTRAC levy?

Austrac has published a draft Determination which sets ’10 February 2012′ as the ‘census day’ under the Australian Transaction Reports and Analysis Centre Supervisory Cost Recovery Levy Act 2011. The census day is the day on which a reporting entity’s liability to pay the levy is determined by the AUSTRAC CEO.

The census day for subsequent financial years will be 1 July or a day determined by the AUSTRAC CEO by legislative instrument.

Print This Post

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

Comments (0)

January 8, 2012

2011 AML/CTF compliance report

AUSTRAC has announced that 2011 AML/CTF compliance reports can now be lodged and are due by 31 March 2012.

All reporting entities who offered designated services during any part of the reporting period from 1 January 2011 to 31 December 2011 must lodge a report.

The 2011 AML/CTF compliance report asks questions relating to four broad topics:
• AML/CTF programs – Part A
• AML/CTF programs – Part B
• reporting obligations
• correspondent banking relationships and electronic funds transfer instructions (if applicable).

Print This Post

Posted 8th January 2012 by David Jacobson in Anti-money laundering

Comments (0)

December 7, 2011

Standards for compliance officers: fit and proper

A recent UK Financial Services Authority decision gives some insights as to its expectation as a regulator of the role of a compliance officer. Although ASIC has not taken similar action in Australia, it does have banning powers.

The FSA fined a hedge fund manager compliance officer 14,000 pounds and banned her from performing any significant influence function in regulated financial services for failing to carry out her duties with due skill and care. She was declared not a fit and proper person.

Dr Sandradee Joseph held the Compliance Oversight controlled function and the Money Laundering Reporting controlled function at Dynamic Decisions Capital Management Limited.

When concerns about bond transactions were brought to her attention by investors she failed to read or give adequate consideration to the matters raised. In fact the transactions had been carried out by another employee to conceal losses suffered by the fund following the collapse of Lehman Brothers.

When interviewed by the FSA Dr Joseph stated that she considered her role as a reporting function, in addition to which, she would be responsible for setting up systems. She said she had no responsibility for the Fund as a lawyer because that was dealt with by external law firms and therefore she could “take a back seat” and that she was satisfied that there were sufficient advisors looking at the documentation relating to the Bond. She also said she did not understand the Bond, so she did not consider that reviewing the documents would have made much sense to her.

She relied on false information from the fraudulent employee in respect of the transaction. In fact no lawyers had been instructed.

The FSA concluded she should have taken steps to ensure that the investors’ concerns were investigated, to verify if the concerns appeared to be legitimate, and if so to take appropriate action.

FSA Final Notice

Print This Post

Posted 7th December 2011 by David Jacobson in Anti-money laundering, Compliance, Financial Services

Comments (0)

November 24, 2011

Draft AML rules

AUSTRAC has released 2 sets of draft rule changes for consultation:

Draft amendments to Chapter 11 will exempt reporting entities which only provide a designated remittance service from the requirement to lodge a compliance report for 2011 as they recently completed registration requirements. A public consultation period is open from 22 November to 6 December 2011.
Draft AML/CTF Rules exempting financial institutions from the applicable customer identification procedure in certain circumstances . The amendments reduce the regulatory burden on reporting entities which are required to conduct the ACIP on multiple signatories to an account before the designated service can provided, when the signatories on a corporate account may run into the hundreds.
The draft AML/CTF Rules apply to the following:
(a) a reporting entity which holds an Australian Financial Services Licence;
(b) a domestic listed public company;
(c) a majority owned subsidiary of a domestic listed public company; or
(d) an Australian government body.
A public consultation period is open from 22 November to 20 December 2011.

Print This Post

Posted 24th November 2011 by David Jacobson in Anti-money laundering

Comments (0)

November 18, 2011

Are facilitation payments bribes?

The Minister for Home Affairs has released a public consultation paper on possible changes to Australia’s anti‑foreign bribery laws.

The Criminal Code (Cth) provides an offence for bribing foreign public officials.

The facilitation payment defence provides a defence to the offence of foreign bribery if:

the value of the benefit was of a minor nature; and
the person’s conduct was engaged in for the sole or dominant purpose of expediting or securing the performance of a routine government action of a minor nature; and
as soon as practicable after the conduct occurred, the person made a record of the conduct.

The Government is reviewing:

•the treatment of ‘facilitation payments’ under Australian law
•the factors that influence whether a benefit is ‘legitimately due’ to the recipient
•the current requirement to identify a particular foreign public official in order to establish an offence, and
•the role of dishonesty in domestic corruption offences.

Print This Post

Posted 18th November 2011 by David Jacobson in Anti-money laundering, Business Planning, Compliance

Comments (0)

November 8, 2011

Report on money laundering in Australia

AUSTRAC has published Money laundering in Australia 2011.

The report brings together law enforcement, intelligence and regulatory information to present a picture of current money laundering activity, vulnerabilities and emerging threats in Australia. It focusses on the different money laundering channels and the government’s response.

Print This Post

Posted 8th November 2011 by David Jacobson in Anti-money laundering

Comments (0)

October 31, 2011

Electronic customer identity verification and privacy

The e-verification provisions in section 35A of the AML/CTF Act expressly permit the use and disclosure of credit reporting information for electronic identity verification purposes to satisfy obligations under the AML/CTF Act, instead of documents, provided the reporting entity has obtained express and informed consent from an individual prior to making a verification request.

A breach of these requirements is a breach of section 13A Privacy Act: section 35L AML/CTF Act.

In summary the e-verification provisions:
• permit a reporting entity to disclose specified personal information (including name, date of birth and residential address) to a credit reporting agency (CRA) for identity verification purposes with the express consent of the individual whose identity is being verified;
• permit a CRA to conduct a matching process between personal information provided to it by a reporting entity and the personal information held on its own files and provide an assessment to the reporting entity of the outcome of the verification process;
• require reporting entities to notify their customers, or other individuals required to be identified under the AML/CTF Act, of unsuccessful attempts to verify identity using credit reporting data;
• require credit reporting agencies and reporting entities to retain information about verification requests and assessments for 7 years from the date of the request for CRAs and for 7 years after ceasing to provide designated services to a customer for reporting entities and to delete it at the end of those periods;
• require a CRA to keep information about verification requests separate from the individual’s credit information file;
• create offences to address unauthorised access to, and disclosure of, verification information.

The use of personal information contained in a credit information file is limited to verification of identification information for customers, or other individuals the reporting entity is required to identify, who are natural persons.

Reporting entities are required to obtain express and informed consent from an individual prior to making a verification request: express consent can be indicated in writing (eg in an account application), online, or on the phone. However, records must be retained to evidence the process followed and the consent given by the individual.

In an online context a customer may be required to ‘check’ a box indicating that the customer has read the information and consents but a failure to opt out (by unchecking a ticked consent box) will not indicate consent.

To ensure that the consent is informed, the consent must be specifically about the disclosure of personal information by the reporting entity to the CRA and use by the CRA of the personal information contained in credit information files for an assessment. The consent must specify that the reporting entity will only use the assessment by the reporting entity for the purpose of verifying the individual’s identity for the purposes of the AML/CTF Act: a general consent to the use of information to verify identity will not be sufficient. If an individual other than the customer is being identified, that person will also have to consent to the process.

The individual must be given information about the reason for making the request for verification, the personal information that may be provided to the CRA, and the fact that the reporting entity is seeking, and the CRA may provide an assessment of whether the personal information matches (in whole or in part) information on the individual’s credit information file.

To ensure that the consent is genuine, paragraph 35A(2)(c) requires that the individual must be given another option, not reliant upon credit reporting information, for verifying their identity.

The reporting entity must retain a record containing specified information relating to a verification request. Section 35F of the AML/CTF Act requires a reporting entity to retain this information for a period starting from the date of the verification request and ending 7 years after the reporting entity ceased providing a designated service to the individual, and must delete it at the end of that period.

The record must contain the name of the CRA to which the request was made, the personal information provided to the CRA, the assessment received, and any other information specified in the AML/CTF Rules.

An individual has the right to:
• Choose whether to agree to verification using information held on their credit information file (section 35A of the AML/CTF Act).
• Be advised if a verification attempt is unsuccessful (section 35C of the AML/CTF Act), including details of which CRA was involved, and offered an alternative means of verification.
• Access information relating to verification requests from the reporting entity and from the CRA (section 35G of the AML/CTF Act).

Print This Post

Posted 31st October 2011 by David Jacobson in Anti-money laundering, Privacy

Comments (0)

October 19, 2011

AML/CTF Rule changes

AUSTRAC has released 2 sets of draft amendments to the AML/CTF rules:

Chapter 23
These draft amendments to Chapter 23 specify that persons who carry out a ‘law practice’ or an ‘accounting practice’ are ‘non-financiers’ as defined in section 5 of the AML/CTF Act and are not carrying out a designated remittance arrangement.

A public consultation period is open from Tuesday 18 October to Tuesday 15 November 2011.

Chapter 28
These amendments to Chapter 28 make it clear that the exemption from conducting the applicable customer identification procedures on assignment, conveyance, sale or transfer of businesses contained in Chapter 28 in certain circumstances, also applies to voluntary transfers of business undertaken pursuant to the Financial Sector (Business Transfer and Group Restructure) Act 1999.

A public consultation period is open from Tuesday 18 October to Tuesday 15 November 2011.

Print This Post

Posted 19th October 2011 by admin in Anti-money laundering

Comments (0)

October 12, 2011

AUSTRAC strategies and priorities 2011-12

AUSTRAC has published its Supervision, Intelligence and Enforcement strategy documents for 2011-12.

They focus on AUSTRAC’s roles as AML/CTF regulator and Australia’s financial intelligence unit.

Amongst other things ” In 2011–12, AUSTRAC plans to triple its supervisory efforts compared to 2010–11, by undertaking 7,000 supervision engagements with reporting entities. In keeping with past practice, AUSTRAC’s intensive supervision activity will include both assessment-based work and awareness building activities.

Assessments will be conducted on those reporting entities which demonstrate anomalous compliance behaviours. It is expected that this intensive assessment activity will apply to at least 1,000 reporting entities.”

Print This Post

Posted 12th October 2011 by David Jacobson in Anti-money laundering

Comments (0)