AML/CTF LAW

The AML/CTF Act covers any business that provides any of the designated services set out in the AML/CTF Act. Anyone providing a designated service is called a ‘reporting entity’ under the AML/CTF Act.

The AML/CTF Act does not define entities by what they call themselves, but by what products and services they offer. This approach aims to achieve a level playing field between providers of the same product or service.

AML/CTF secondary legislation comprises the AML/CTF Regulations and Rules that contain the requirements with which reporting entities must comply.

AML/CTF regulations usually address technical issues associated with the AML/CTF Act.

The AML/CTF Rules detail what reporting entities must do to comply with the AML/CTF Act. The Rules are made by AUSTRAC.

AUSTRAC is Australia’s AML/CTF Regulator and Financial Intelligence Unit (FIU). Through its AML/CTF regulatory activities AUSTRAC educates, monitors and works to improve the effectiveness of reporting entities’ compliance with AML/CTF obligations.

In some circumstances, AUSTRAC may seek to enforce compliance with the AML/CTF law through more formal enforcement mechanisms. As the FIU, AUSTRAC also collects, retains and analyses different types of reporting, required by the AML/CTF Act. It also disseminates intelligence to law enforcement and other partner agencies in Australia and overseas.

To find out more about AUSTRAC and the obligations you have under the AML/CTF Act and Rules go to www.austrac.gov.au,  contact Initialism or download our guide to AML/CTF in Australia.

AML/CTF laws and regulations require businesses to put in place appropriate controls to make it harder for them to be used to launder money, and when they are or suspect they are being used to launder money report it to the authorities.

AML/CTF is also a program of activity (set out in AML/CTF policies, procedures and controls) designed to manage and/or mitigate the risk that legitimate businesses are being used to launder money generated through illegal activity.

Your AML/CTF compliance program should be designed to support a business playing its part in preventing, detecting and reporting instances of money laundering and terrorism financing that occur through the legitimate products and services it offers.

There are no hard and fast rules about how money is laundered.  However, money laundering cannot occur without a crime which gives rise to the illegally obtained funds.

Such crimes are called ‘predicate crimes’. Common predicate crimes are drug trafficking, human trafficking, fraud, theft, corruption, and tax evasion.

AML/CTF law and regulation globally included the requirement to identify, mitigate and manage the risk that a business may be vulnerable to being used to launder money.

The techniques used by terrorism financiers are very similar to those used by money launderers. However unlike money laundering the source of funds may be legitimate and their intended use or purpose is illegal.

AML/CTF law and regulations globally include the requirement to identify, mitigate and manage the risk that a business may be vulnerable to being used for terrorist financing.

Targeted Financial Sanctions (TFS) target a country, the trade in specific goods or services with a country or parties within a country. Sanctions regulations also prohibit financial dealings with designated entities or individual citizens of a country.

There are three types of Targeted Financial Sanctions:

• United Nations sanctions issued by the UN Security Council
• Autonomous sanctions issued by a particular country, and
• Countermeasures issued by a particular country.

Sanction regimes are political in nature and are an instrument of foreign policy and economic pressure that can also be currency sensitive, and therefore have extra-territorial considerations and reach.

Sanctions compliance leverages the techniques and controls used to comply with AML/CTF law and regulation to ensure a business is not undertaking business with sanctioned parties or supporting the trade in goods and services that is prohibited by TFS.

The key focuses of the change program include:

• Simplification of the AML/CTF law to enable reporting entities to better understand and comply with their AML/CTF obligations.
• Review of the AML/CTF obligations under the AML/CTF Act, Rules and Regulations to ensure they are proportionate to the ML/TF risks faced by reporting entities.
• Widening the scope of the AML/CTF Act and Rules to cover new technologies and payment systems and to adopt a technology neutrality principle.
• Simplification of customer due diligence requirements within AML/CTF Rules.
• Extend the scope of the AML/CTF Act to cover ML/TF vulnerable services provided by lawyers, conveyancers, accountants, high-value dealers, real estate agents and trust and company service providers. These gatekeepers are commonly known as designated non-financial businesses and professions.
• Giving AUSTRAC the remit to regulate compliance with Targeted Financial Sanctions (TFS).

Initialism’s AML/CTF compliance solutions can support you in keeping up with compliance requirements as they evolve.

When determining if you are compliant you should ask yourself the following questions:

• Is your ML/TF Risk Assessment up to date and does it adequately identify your ML/TF risks?
• Does your AML/CTF Program cover the current requirements set out by the AML/CTF Act and Rules?
• Are you able to monitor for changes in the Act, Regulations and Rules and AUSTRAC Expectations when they occur?
• Have you commissioned an independent review of your AML/CTF compliance in the last two years?

If you have answered no to any of the questions or are not sure, you should contact Initialism about affordable compliance solutions before potential non-compliance becomes a problem.

With over 50 years of expert knowledge and real world experience, our AML/CTF compliance solutions will to help you navigate your legal and regulatory requirements so that your business complies with its AML/CTF obligations in the fastest and most cost-effective way.

Initialism offers a range of AML/CTF services to support becoming and maintaining AML/CTF compliance.