AUSTRAC New Compliance Report – The Implications For Reporting Entities

AUSTRAC New Compliance Report

AUSTRAC New Compliance Report – The Implications For Reporting Entities

AUSTRAC has published the revised questions for its’ AML/CTF Compliance Annual Return that all reporting entities will be required to complete before the 31st March 2019.

The questions in the new report are a step up from the previous questions, and will provide AUSTRAC with clearer insights into the level of compliance within a reporting entity.  It is therefore important that each reporting entity understands the implications of the new compliance report questions, and the way that the information supplied to AUSTRAC in response to the questions will be used.

The annual AML/CTF compliance report is an annual assessment by each reporting entity on their level of compliance.  AUSTRAC have previously used the information provided through the report to draw conclusions about industry sector level compliance.  The new questions will allow AUSTRAC to develop greater insights at an industry sector level, but will also allow AUSTRAC to understand in more detail the level of compliance by individual reporting entities.

This equates to an increased level of AML/CTF compliance supervision by AUSTRAC, and means that the responses to the questions could be used to indicate whether or not a reporting entity is compliant with its AML/CTF obligations.  The responses could also be used to identify reporting entities that require additional supervisory attention and expose them to possible subsequent regulatory action.

The response to questions will also be used by AUSTRAC to benchmark reporting entities across an industry sector to peer assess compliance arrangements and levels.

It is important that a reporting entity responds to the questions accurately.  However, reporting entities should be aware that the way the questions are answered could indicate potential deficiencies in their AML/CTF arrangements. As an example:

Question: When was your program most recently approved? – Your AML/CTF Program must be formally approved by your Directors, AUSTRAC are seeking to understand if that has happened.  AUSTRAC also want to understand when you last updated your program as this will indicate if your program is up to date.  If you have not updated your program in the last 2-3 years the program may be out of date.

Question: Did you make changes to your program, and if yes, what prompted these changes? – Through these questions AUSTRAC can assess whether you have been keeping track of changes to AML/CTF requirements.  Depending upon your answers AUSTRAC will be able to determine whether you have adjusted your AML/CTF Program for all necessary changes.

Question: Have you reported internally? – This question allows AUSTRAC to understand the level of governance and oversight the Directors have put in place to ensure AML/CTF compliance is operating effectively.

Question: When did your last independent review commence? – Your AML/CTF Program must be independently reviewed periodically. Whilst the frequency of review is not defined, expectations are that reporting entities should commission an independent review at least every 2-3 years.  This question allows AUSTRAC to understand if you have adequately reviewed the level of AML/CTF compliance.

Question: Have you done an ML/TF risk assessment of your business? – A key requirement of the AML/CTF Act is for reporting entities to understand their money laundering (ML) and terrorist financing (TF) risks.  Reporting entities must have a written risk assessment, which appropriately considers their ML/TF risks.  AUSTRAC expect positive answers as any negative answers will indicate non-compliance.

Question: If a risk assessment was done, have you made changes to your ML/TF risk assessment and if yes, what prompted the change? – AUSTRAC expect that your ML/TF risk assessment is kept up to date as a reporting entity’s business changes.  AUSTRAC through asking these questions will be able to assess whether you have appropriately maintained an understanding of your ML/TF risks, and whether or not you are in compliance with your obligations to understand and maintain an understanding of your ML/TF risks.

Before 31st March next year, all reporting entities should consider their AML/CTF Program and compliance arrangements and ensure that they are able to respond to AUSTRAC questions appropriately, and therefore be able to demonstrate an appropriate level of AML/CTF compliance.

Failure to respond appropriately to the questions in the AML/CTF Compliance Annual Return could result in increased regulatory attention.