26 Oct A Cunning Plan? – The Australian AML/CTF Reform Project Plan
The Report on the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006 was released on 26th April 2016, identifying 84 recommendations.
After next to no public communication since April, the Attorney General’s Department (AGD) has published a project plan setting out a ‘road map’ for consulting with industry on the 84 recommendations. https://www.ag.gov.au/Consultations/Documents/AML-CTF/Draft-Project-Plan-AML-CTF.pdf
The project plan to address the 84 recommendations extends out until the end of 2018 when implementation of Phase 2 will commence, presumably with a transition period into 2019.
The project plan splits the recommendations into two phases:
Phase 1 will progress initiatives that have been identified as priority projects for completion in 2017.
Phase 2 will progress significant reforms, the details of which need to be developed in close consultation with Government agencies and industry. These include measures to simplify, streamline and clarify AML/CTF obligations, and strengthen compliance with the FATF standards.
The specific areas that will be addressed in Phase 1 include:
- Information Sharing
- Audit & Enforcement and Information Gathering
- Powers of the AUSTRAC CEO
- Customer Due Diligence
- Cross-border Reporting
- New Payment Methods
These topics are already being consulted on, and it is indicated that consultation will continue for the rest of 2016 including:
- The release of stakeholder consultation papers for public comment
- A number of roundtable discussions on issues raised in response to the consultation papers, and
- Targeted consultation and co-design of reforms.
For Phase 1 it is identified that the legislative process will be completed by June 2017, with implementation by Reporting Entities via a transition period thereafter.
Work has also commenced on the following areas:
- Tranche Two (DNFBPs)
- Reform of CTF Measures
- Sanction Compliance Supervision
These areas appear to be still in exploratory stages, with reports on CTF reform and sanction supervision anticipated to be completed before the end of 2016, with a tranche two report, on the cost benefit of the various options by the end of June 2017.
No legislative timetable has been set for these changes but presumably they will be aligned to the Phase 2 timetable which extends out in 2018/19.
In order to co-ordinate and provide governance over the process three new committees have been formed.
A National Anti-Money Laundering and Counter-Terrorism Financing Committee (NAC) will be established to oversee the project.
This committee will be chaired by Attorney-General’s Department (AGD) and include senior executive officials from a number of Government agencies.
The AML/CTF Coordinating Committee (AML/CTF CC) will be an inter-departmental committee of representatives at officer level from AGD and AUSTRAC and will be formed to coordinate the implementation of the project. The AML/CTF CC will be chaired by AGD and report progress to the NAC.
An AML/CTF Industry Consultation Council will be established to provide the NAC and AML/CTF CC with information and advice during the life of the project and provide a primary conduit for engaging with industry about the progress of the project.
Industry stakeholders will include peak organisations and associations representing regulated sectors, or sectors that may become regulated under proposed reforms, as well as the affected businesses.
Factors for Implementation
The project plan identifies number of factors that will influence the implementation of the recommendations.
Co-design with industry
An overarching recommendation arising from the review of the AML/CTF regime was that any reforms to the AML/CTF Act and Rules that have a regulatory impact should be co-designed by Government and industry.
The risk-based approach
The risk-based approach is a key pillar of Australia’s AML/CTF regime. Reporting entities should continue to have the flexibility to implement appropriate AML/CTF compliance measures that are proportionate to their assessed level of ML/TF risk.
Any reforms to the AML/CTF regime will consider the Government’s ‘better regulation’ agenda with a view to achieving regulatory efficiencies for business and government.
Reforms will occur in two ‘packages’, rather than as a process of continuous reform to avoid regulatory fatigue and increased compliance costs for industry.
The timing of any reform packages should also be cognisant of other reforms occurring that will have a regulatory impact on industry.
Compliance with the Financial Action Task Force (FATF) standards
The review of the AML/CTF regime considered the findings of the FATF’s mutual evaluation of Australia’s compliance with the FATF’s international standards for combating money laundering and terrorism financing.
The implementation of certain recommendations of the review is intended to align Australia’s regime with the relevant FATF standards.
While the project plan document outlines the intended approach to implementation, final decisions on policy outcomes, legislation and timing remain a matter for the Government.
It was clear in April, based on the Statutory Review Report, that the changes necessary were significant, complex, and with multiple layers of interdependency across multiple topics and areas.
The project plan the AGD has put in place appears to systematically address the recommendations in a logical and thoughtful way.
So, is the plan a cunning plan?
The complexity of the internal and external environments require careful positioning, checks and balances, and negotiations in order to get the best outcomes, the AGD’s plan puts in place mechanisms and allows time to achieve the outcomes needs.
However, the fact that Australia may not get around to addressing 2014 FATF mutual evaluation findings until 2019 – and tranche two is not due for inclusion until probably the end of 2017 – despite being a key focus by the FATF and G20, may put Australia in an interesting position with its peers in the international community.