Client Update: Anti-money Laundering – 2 November 2006
Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 introduced into Federal Parliament
In brief: Partners Peter Jones and Anna Lenahan(view CV) and Senior Associate Judy Maguire report on the Anti-Money Laundering and Counter-Terrorism Financing Bill 2006.
The Anti-Money Laundering and Counter-Terrorism Financing Bill 2006 (the Bill), which forms part of a legislative package of AML/CTF reforms that will bring Australia's AML/CTF regime into compliance with international standards, in particular those set by the Financial Action Task Force, was introduced to Federal Parliament yesterday. We understand the Bill will not be debated until late November.
The Bill imposes a range of AML/CTF obligations on a wide range of financial sector providers and the gambling sector. Core requirements include enhanced due diligence, transaction monitoring, threshold and suspicious matter reporting, record keeping, correspondent banking controls and the implementation of an AML/CTF program.
The Bill will be implemented in phases. The requirement to identify and verify customers will come into effect 12 months after the commencement of the Act. Industry, which was looking at a two-year transition period to implement its Customer Due Diligence (CDD) procedures, will need to move quickly to plan and resource the substantial system changes that will be necessary to meet this deadline.
Suspicious matter and threshold reporting obligations will take effect after 24 months. Reporting entities will need to set up their AML/CTF programs within 12 months.
Critical details will be in the Rules. No new Rules have been released with the Bill. References in the Bill are to the Draft Rules which were released with the Second Exposure Draft Bill in July. The difficulty is that these are now misaligned with the Bill and will need to be significantly augmented and edited.
We would expect the existing Draft Rules to be revised and new Rules, as necessary, to be prepared by AUSTRAC in consultation with industry. Problems will arise if particular Rules are not finalised in good time before the relevant part of the legislation takes effect.
Other significant items include:
- the introduction of a new designated service which is described as 'in the capacity of a holder of an Australian financial services licence, making arrangements for a person to receive a designated service (other than a service covered by this item)'. This seems to be an extremely wide provision and its application is unclear, particularly in light of the explanation in the Explanatory Memorandum, which appears to contemplate the designated service being the provision of personal advice by a financial adviser.
- simplification of the third party provisions. Reporting entities can now appoint agents to carry out their customer due diligence for them and can rely on CDD which has been carried out by another reporting entity. The definition of a designated business group (DBG) has been extended to cover groups of two or more 'persons' rather than corporate groups. It does not appear from the Bill that membership is restricted to reporting entities but as the Rules on DBG's have not yet been drafted it is not clear at this stage what other conditions as to membership will apply.
For further information, please contact:
- Anna LenahanPartner,
Sydney
Ph: +61 2 9230 4132
Anna.Lenahan@aar.com.au
