What is Anti-Money Laundering (AML) in Australia?

In Australia, AML efforts are governed primarily by The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) and the Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules). These legislative frameworks establish the guidelines and requirements for entities operating within the Australian financial system to combat money laundering and terrorism financing activities.

What is anti-money laundering (AML) in Australia?

Money laundering involves processing criminal profits to conceal their illicit source, allowing criminals to enjoy their gains without detection. Additionally, terrorism financing, which encompasses the funding of terrorist acts and organizations, poses a significant threat to national security and stability. Anti-Money Laundering (AML) legislation is designed to combat these illegal activities.

In Australia, the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) is the cornerstone of AML efforts. This legislation regulates various sectors, including financial institutions, gambling establishments, remittance services, digital currency exchanges, and bullion dealers, which provide designated services susceptible to money laundering and terrorism financing activities.

Understanding the AML/CTF Act

Under the AML/CTF Act, reporting entities, including businesses and professionals offering designated services, must implement stringent measures to prevent money laundering and terrorism financing. These measures include collecting and verifying customer identity information through Know Your Customer (KYC) procedures. In addition, reporting entities must comply with the Privacy Act 1988 when handling personal information collected for AML/CTF Act compliance purposes.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is the regulatory authority responsible for ensuring compliance with the AML/CTF Act. AUSTRAC oversees reporting entity compliance, conducts investigations into suspicious financial activities, and collaborates with other agencies to safeguard Australia’s financial integrity and security. Additionally, the AUSTRAC CEO must consult with the Australian Information Commissioner on privacy functions, highlighting the importance of privacy considerations in AML/CTF efforts.

Obligations under the AML/CTF Act

The AML/CTF Act places six primary obligations on regulated businesses:

1. Enrolment and registration with AUSTRAC. Regulated entities offering designated services must enroll with AUSTRAC. Additionally, remittance and digital currency exchange providers must register with AUSTRAC to facilitate additional checks to prevent criminals and their associates from infiltrating these sectors.
2. Development and maintenance of an AML/CTF Program. Regulated entities must assess the money laundering and terrorism financing (ML/TF) risks associated with providing designated services to customers. They must then establish and uphold an AML/CTF program comprising systems and controls to mitigate and manage these risks effectively.
3. Conducting ongoing customer due diligence (CDD). Regulated entities must authenticate a customer’s identity before delivering a designated service and comprehensively understand the customer’s risk profile. Thye are also required to continually perform CDD throughout the duration of the business relationship, including ongoing transaction monitoring and enhanced CDD when necessary.
4. Reporting. Regulated entities must promptly report all suspicious activities to AUSTRAC. This includes cash transactions exceeding A$10,000, instructions for transferring value into or out of Australia, annual compliance reports, and cross-border movements of monetary instruments.
5. Record keeping. Regulated entities must create and retain specific records relevant to investigating financial crime or complying with the AML/CTF regime for at least seven years. These records must be readily available to law enforcement authorities upon request.

Penalties for non-compliance with the AML/CTF Act

Failure to fulfill compliance obligations under the AML/CTF Act can result in significant monetary penalties for regulated entities. Civil penalties for breaches range from hundreds of thousands to millions of dollars, depending on the severity of the violation.

In cases of egregious non-compliance or repeated offenses, regulatory authorities may resort to enforcement actions beyond monetary fines. These actions may include injunctions, license suspension, or even revocation, significantly impeding an entity’s operational capabilities.

To avoid facing penalties under the AML/CTF Act, obligated entities should establish robust compliance frameworks. This includes conducting regular risk assessments, implementing effective customer due diligence procedures, enhancing transaction monitoring capabilities, and ensuring comprehensive record-keeping practices. By proactively addressing compliance requirements and staying on top of regulatory updates, entities can strengthen their defenses against non-compliance and contribute to the collective effort to combat money laundering and terrorism financing in Australia.

Summary

• AML refers to regulations and practices aimed at detecting and preventing the illegal process of disguising the origins of money obtained through criminal activities.
• In Australia, AML efforts are governed primarily by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act).
• Under the AML/CTF Act, reporting entities must implement stringent measures, including Know Your Customer (KYC) procedures, to prevent money laundering and terrorism financing.
• The Australian Transaction Reports and Analysis Centre (AUSTRAC) oversees compliance with the AML/CTF Act and collaborates with other agencies to safeguard financial integrity and security.

Sources:

• www.ag.gov.au

• www.oaic.gov.au

• www.austrac.gov.au

• www.aph.gov.au