Changes To Australia’s Anti-Money Laundering And Terrorism Financing Framework.

 

22 January 2021

 

 

What you need to know

 

• On 17 December 2020, the Australian Government passed the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Bill 2020 (the Amendment). The Amendment introduces a raft of measures aimed at strengthening Australia's anti-money laundering and terrorism financing framework.
   

• The amending legislation gives effect to recommendations from the Financial Action Task Force (FATF) (an inter-governmental body which sets global standards for tackling money laundering and terrorism financing) and a 2016 statutory review of the AML regulatory regime.
   

• The amendment introduces changes to (among other things) customer identification procedures, correspondent banking relationships, tipping-off offences, access to information, and the cross-border movements of money.
   

Why have the changes been introduced?
 

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) empowers AUSTRAC, Australia's AML regulator, with a range of measures to detect and deter money laundering and terrorism financing.
 

The Amendment responds to increasing criticism of the AML/CTF Act over the years. In its 2015 mutual-evaluation report on Australia's AML/CTF regime, FATF raised a number of concerns about Australia's customer due diligence requirements and the limited use of AUSTRAC information by law enforcement.
 

A 2016 statutory review of the AML/CTF Act by the Australian government also made a number of recommendations to simplify the obligations on reporting entities and enhance collaboration between government agencies to detect organised crime.
 

What are the key changes?
 

Customer identification procedures
 

The Amendment expands the circumstances in which reporting entities may rely on due diligence performed by a third party. This is aimed at reducing the costs and regulatory burden associated with entities fulfilling their AML/CTF obligations.
 

New sections 37A and 37B of the AML/CTF Act allow a reporting entity to rely on customer identification procedures undertaken by a third party if the entity:
 

• enters into a written agreement or arrangement with the third party, where that third party is subject to appropriate AML/CTF regulation and supervision;
   

• carries out regular assessments of the arrangement; and
   

• has reasonable grounds to believe that the customer due diligence requirements of the AML/CTF Rules are being met.
   

Where these requirements are met, the relying party has a safe harbour from liability for isolated failures by the third party to meet applicable customer identification procedures.
 

Section 38 of the AML/CTF Act now allows a reporting entity to rely on the customer identification procedures undertaken by another reporting entity or foreign entity if:
 

• the other reporting entity or foreign entity has undertaken the customer identification procedures prescribed by the AML/CTF Rules; and
   

• the first entity has reasonable grounds to believe that it is appropriate to rely on those procedures having regard to the risks of money laundering and terrorism faced by it.
   

Unlike the new sections 37A and 37B, there is not a safe harbour from liability by reason of use of section 38. Nevertheless, section 38 offers the benefit of enabling reporting entities to leverage customer identification occurring within multinational corporate groups.
 

Further, the prohibition in section 32 of the AML/CTF Act has been clarified: generally, a reporting entity must not provide a designated service if it is unable to carry out the relevant customer identification procedures.
 

Correspondent banking relationships
 

The Amendment imposes more stringent obligations in relation to correspondent banking relationships, in recognition of the increased money laundering risks posed by these relationships.
 

Section 95 of the AML/CTF Act now prohibits financial institutions from entering into a correspondent banking relationship with a financial institution that permits its accounts to be used by a shell bank.
 

Section 96 of that Act also now requires financial institutions to conduct due diligence assessments not only upon entry, but also during, all correspondent banking relationships.
 

Tipping-off offences
 

Reporting entities remain prohibited from disclosing the making of suspicious matter reports, otherwise known as 'tipping-off'. However, the Amendment introduces new exceptions to address some of the complexities of the previous provisions and to enhance collaboration between agencies.
 

Section 123 now allows disclosure of suspicious matter reports to:
 

• external auditors who are reviewing the reporting entity's AML/CTF program; and
   

• members of a designated business group or corporate group outside of Australia (provided those members meet certain requirements) for the purpose of disclosing the risks involved in dealing with a particular customer. The intent is to enable global businesses to more effectively manage risks associated with their international footprint.
   

The section also provides for some relaxation of the prohibition on disclosing the fact that AUSTRAC or another government agency has issued a notice requiring production of information about a particular person, so that disclosure of the fact of such notices is now permitted as regards the various agencies involved.
 

Access to information
 

The Amendment enables greater information sharing between the public and private sector to enhance investigation capabilities.

 

The AML/CTF Act previously 'designated' relevant agencies which could access and disclose AUSTRAC information, and utilised a narrow definition of 'AUSTRAC information'. Section 125 introduces a more general information sharing power which allows the AUSTRAC CEO to authorise officials of Commonwealth, State or Territory agencies to access a broader range of AUSTRAC information for the purpose of performing their ordinary duties and functions.
 

Section 127 also allows the AUSTRAC CEO or a Commonwealth, State or Territory agency to disclose AUSTRAC information to foreign agencies and governments upon the provision of relevant undertakings.
 

Various safeguards have been introduced to accompany this increased information sharing. The Amendment expands a number of offences in the AML/CTF Act for disclosing AUSTRAC information to also prohibit making a record of, authorising access to or using AUSTRAC information, other than as provided for in the AML/CTF Act.
 

Cross-border movements of money
 

The Amendment streamlines provisions relating to cross-border movement of physical currency and bearer negotiable instruments, such as cheques and bills of exchange.
 

Section 53 of the AML/CTF Act now requires travellers to report all cross-border movements of monetary instruments over $10,000, whether this in the form of physical currency or bearer negotiable instruments. The term 'monetary instruments' is intended to capture the full breadth of methods in which money may be laundered to and from overseas. Similarly, section 54 requires that all receipts of monetary instruments over $10,000 from overseas must be reported.
 

The Amendment also expands section 143 so that the offence of structuring movements of physical currency into or out of Australia now applies to any monetary instruments.
 

When do these changes come into force?
 

The changes to customer identification procedures, correspondent banking relationships, tipping-off offences and access to information are expected to come into effect on 18 June 2021.
 

The changes to cross-border movements of money will commence on proclamation or 18 June 2022 (i.e. 18 months after Royal Assent), whichever occurs first.

For further information, please contact:

 

Rani John, Partner, Ashurst
rani.john@ashurst.com