Australian Regulatory Compliance Review

Austrac enforceable undertakings

AUSTRAC has commenced a new enforceable undertakings regime.

An enforceable undertaking is a written undertaking that is enforceable in a court, given to and accepted by the AUSTRAC CEO. They are generally an alternative to civil or administrative action where there has been a contravention of the AML/CTF Act, the regulations or the AML/CTF Rules.

Austrac's first acceptance of enforceable undertakings are from Barclays Bank PLC and Mega International Commercial Bank Co,. Ltd , following a number of deficiencies and breaches, including reporting breaches,of Australia's anti-money laundering and counter-terrorism financing (AML/CTF) laws.

Barclay's breaches were identified following an on-site assessment.

The undertakings require the companies to:

• review transactions for a period of seven years and provide AUSTRAC any outstanding reports required by law;
• develop and implement proper systems and controls to ensure that the company complies in the future with its reporting and AML/CTF program obligations;
• submit to AUSTRAC an independent expert report detailing the company's compliance with the AML/CTF laws. The companies will also be required to submit similar reports in 2010 and 2011.

AUSTRAC Typologies and Case Studies Report 2009

AUSTRAC has issued a new typologies report which outlines some of the latest money laundering methods and other financial crimes in Australia.

The AUSTRAC Typologies and Case Studies Report 2009 presents a range of case studies that highlight illicit activities.

The report also features many 'red flag' indicators of suspicious customer behaviour, and crimes including card skimming, early release super schemes, Ponzi schemes, 'boiler room scams', and internet, lottery and sweepstake scams.

Austrac: when will it issue a "no action" letter?

Austrac has issued a draft amended guidance note 08/01 giving more details of when it will issue a no action letter rather than grant an exemption request for a breach or anticipated breach of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 .

In revised section 4 of the draft amended guidance note it discusses 3 scenarios and whether a no action letter or an exemption request would be more appropriate:

• A reporting entity experienced an impractical outcome resulting from an interaction between the FTR Act and the AML/CTF Act.

• During an audit in July 2008, a reporting entity became aware of deficiencies in the customer identification process it had applied to customers of about 200 transactions (from a total of several thousand transactions).

• A reporting entity was winding down its business in December 2007 when the AML/CTF program obligations came into effect.

Draft AML/CTF Rules for 'exempt legal practitioner service'

Austrac has issued draft AML/CTF Rules to define the term 'exempt legal practitioner service' under section 5 of the AML/CTF Act. It will apply to legal practitioners who provide designated services relating to 'a custodial or depository service' (item 46) and 'a safe deposit box or similar facility' (item 47), when undertaken in the ordinary course of legal practice, but do not apply when those designated services are provided by a legal practitioner who supplies financial services under the Act.

A public consultation period is open from 22 May 2009 to 5 June 2009.

Austrac Public Legal Interpretation No. 3 of 2008 – remittance services providers

PLI 3 of 2008 discusses who is a provider of a ‘registrable designated remittance service’ and the obligation to register as a provider of ‘registrable designated remittance services’.

Draft AML/CTF Rules relating to the sale of shares for charitable purposes

Austrac has released for consultation draft AML/CTF Rules relating to the sale of shares for charitable purposes.

These draft AML/CTF Rules exempt from the customer identification provisions of the AML/CTF Act, those persons who provide an item 33 designated service involving the disposal of low-value parcels of shares, for the purpose of passing the proceeds to charitable organisations who are deductible gift recipients under the Income Tax Assessment Act 1997.

A public consultation period is open from 23 April 2009 to 7 May 2009.

Attorney-General's update on AML/CTF

In his speech on 1 April, the Attorney-General indicated the Goverrnment is balancing the need for the second tranche of reforms (to extend the existing AML/CTF Act to services provided by a range of businesses and professions, including accountants, lawyers, real estate agents and jewellers) against the very immediate needs of business in the current financial climate.

He said"the global financial crisis increases the risk of this type of activity but it has to be balanced against concerns industry may have regarding compliance."

It will be interesting to see whether the second tranche is postponed.

Risk life insurance and the AML/CTF Act

Austrac has issued an information sheet about the regulation of risk life insurance under the AML/CTF Act. Risk life insurance products that do not have a prescribed minimum surrender value are not captured under the AML/CTF Act.

Draft AML/CTF Rules to exempt certain reporting entities from threshold

Austrac has issued draft AML/CTF Rules to exempt certain reporting entities from threshold transaction reporting.

These draft AML/CTF Rules exempt ADIs and Exchange Settlement Account holders from providing threshold transaction reports, if those threshold transactions take place wholly between authorised deposit-taking institutions (ADIs) or Exchange Settlement Account holders, or between the Reserve Bank of Australia and Exchange Settlement Account holders, or cash logistic carriers who provide item 51 or item 53 designated services under table 1 in subsection 6(2)of the AML/CTF Act, where these designated services relate wholly to a transaction between one ADI and another ADI.

A public consultation period is open from 11 March 2009 to 25 March 2009.

Austrac issues PLI 9 - Customer identification requirements under the AML/CTF Act

PLI 9 - Customer identification requirements under the AML/CTF Act deals with:

• The nature and content of risk-based ‘applicable customer identification procedures’ under Part 7 of the AML/CTF Act and the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No.1) (AML/CTF Rules 2007)
• When and in what circumstances ‘applicable customer identification procedures’ are to be carried out as set out in Part 2 of the AML/CTF Act
• Relevance of the ‘100 point check’ prescribed in the Financial Transaction Reports Regulations 1990 for identification procedures under the AML/CTF Act.