16 March, 2016
Introduction
With the introduction of the Anti-Money Laundering and Counter-Terrorism Financing (Prescribed Foreign Countries) Regulation 2016 (Cth), the Australian Government has made important changes that impact how reporting entities must deal with Iran and the Democratic People's Republic of Korea (the DPRK or North Korea). The new regulations:
a) declare Iran and the Democratic People's Republic of Korea (the DPRK or North Korea) "prescribed foreign countries" under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act);
and
b) remove the prohibition on processing financial transactions valued at A$20,000 or more and involving persons in Iran without prior authorisation.
Background
The Australian Government is entitled to apply "countermeasures" against prescribed foreign countries in accordance with its international AML/CTF obligations. These countermeasures are intended to protect the Australian financial system from ongoing terrorism financing and money laundering risks that originate overseas, and can be amended from time to time.
Prescribed foreign countries and enhanced customer due diligence
By declaring Iran and North Korea "prescribed foreign countries" under the AML/CTF Act, the Australian Government now requires Australian reporting entities to apply enhanced customer due diligence (ECDD) to all of their customers associated with Iran and North Korea. There is no prohibition on dealing with either jurisdiction, rather, reporting entities are now expected to apply additional measures to identify, mitigate and manage the money laundering and/or terrorism financing risks associated with these jurisdictions.
Though all reporting entities are already required to have an ECDD program as part of their AML/CTF Compliance Program, they must now apply the ECDD program when they enter into, or propose to enter into, a transaction involving a party that is physically present in, or is a corporation incorporated in, either Iran or North Korea (in addition to any other prescribed foreign countries under the AML/CTF Act).
Removal of prohibition on transactions involving persons in Iran
The new regulations remove the previous prohibition on processing financial transactions that:
- are valued at A$20,000 or more; and
- involve persons in Iran or companies incorporated in Iran; and
- have not been approved by the Australian Department of Foreign Affairs.
However, AUSTRAC continues to expect reporting entities to treat all transactions associated with Iran or North Korea as high-risk transactions for the purposes of their transaction monitoring systems.
Conclusion and next steps
It is important for reporting entities in Australia to understand and consider the likely effect of the modifications to Australia's countermeasures against Iran and North Korea.
If you are uncertain about the effect of the modifications, have a question about ECDD, or would otherwise like to contact us, please do not hesitate to get in touch with a member of our team.
Supplementary information
Click here to view the new regulations.
For further information, please contact:
Astrid Raetze, Partner, Baker & McKenzie
astrid.raetze@bakermckenzie.com
