This article was written by Hayley Johnson
Commencing from 18 June 2021, certain amendments to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (“AML/CTF Act”) and Anti-Money Laundering and Counter-Terrorism Financing Rules 2006 (“AML/CTF Rules”) will come into force, streamlining the previous due diligence obligations and introducing new obligations for those entities which are regulated by the regime.
The key amendments to the AML/CTF Act are:
- reformed Customer Identification Procedures (“CIP”);
- further correspondent banking prohibitions;
- new exceptions to tipping off offences; and
- increased pecuniary penalties for cross-border movement of ‘monetary instruments.’
Customer Identification Procedure
Under the AML/CTF Act, an entity (the “reporting entity”) must not provide certain services which are specified in s 6 of the AML/CTF Act (“designated services”) to a customer unless it has completed the applicable CIP. Subject to limited exceptions, the previous regime did not allow reporting entities to rely on CIP undertaken by other entities. The amendments provide two new circumstances where reporting entities may rely on CIP performed by others:
- Written agreement between reporting entity and the party undertaking CIP
Where a reporting entity:
- enters into a written agreement with another party undertaking CIP and has reasonable grounds to believe that the requirements prescribed by the AML/CTF Rules were met by the other party; and
- conducts regular assessments to ensure that the other party is meeting those requirements,
the new amendments to rely on the CIP performed by the other party as if the reporting entity had carried out the applicable CIP.
- Reasonable grounds to rely on the other party’s CIP
- a reporting entity has reasonable grounds to believe that it is appropriate to rely on another entity’s CIP in respect of a certain customer, having regard to the risk of that customer being involved in or facilitating money laundering or financing of terrorism; and
- the other party has satisfied the CIP prescribed in the AML/CTF Rules,
the new amendments allow the reporting entity to rely on the CIP performed by the other party as if the reporting entity had carried out the applicable CIP.
Certain additional requirements stipulating when the CIP by another party can be relied upon are set out in the updated AML/CTF Rules.
These amendments are intended to allow entities which would otherwise delegate their AML/CTF obligations to offshore affiliates or counterparties (such as investment managers, or trustees) but couldn’t do so due to operational and local law requirements, to delegate their AML/CTF obligations to such entities without requiring the offshore entity to comply with Australian AML/CTF laws.
Correspondent Banking Prohibitions
The restrictions on correspondent banking have been tightened to prohibit a financial institution from entering a banking relationship with another financial institution which permits its accounts to be used by a shell bank.
The amendments also remove the defence which was available to financial institutions: that the financial institution was not reckless as to whether the correspondent bank was a shell bank or had a correspondent banking relationship with a shell bank when entering the relationship.
Further, the factors which must be assessed by the correspondent bank have been reframed and now apply to the risks of money laundering, financing of terrorism or other serious crime.
Tipping off offence
The amendments clarify to whom a reporting entity may disclose information about a suspicious matter report by providing exceptions to the offence of tipping off. Two new exceptions were added to the list of exceptions:
- information may be disclosed to someone appointed or engaged to audit or review a reporting entity’s AML/CTF Program;
- information may be disclosed to foreign members of corporate and designated business group if:
- the body corporate/other person is also a reporting entity; or
- the body corporate/ other person is regulated by foreign laws that give effect to some or all of the Financial Action Taskforce Recommendations and has given a written undertaking for protecting the confidentiality and controlling the use of the information, and ensuring that the information will only be used for the purpose for which it was disclosed.
Cross-border movement of monetary instruments
The amendments consolidate reporting provisions regarding cross-border movements of physical currency and bearer negotiable instruments (“BNIs”), where both are considered ‘monetary instruments’ under the updated Act.
While the consolidated provisions largely replicate the previous requirements, the pecuniary penalty of an infringement notice issued for a breach of cross-border reporting requirements will increase to 60 penalty units (for a body corporate) or 12 penalty units (for a person other than a body corporate).