Introduction
In 1989 an inter-governmental body, known as the Financial Action Task Force (FATF), was established by Ministers of Member jurisdictions, which included Australia. Its mandate is to promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. It also sets an international standard, known as the FATF Recommendations, for countries to implement according to their circumstances and conducts evaluations of the effectiveness of member countries’ AML/CTF measures as assessed against the FATF Recommendations.
Australia is also a signatory to various international and UN conventions and resolutions that deal with money laundering, corruption and transnational organised crime.
Australia’s anti-money laundering framework, guided by the FATF Recommendations and its international obligations, consists of the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (AML/CTF Act), the Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 (No 1) (AML/CTF Rules) and the Anti-Money Laundering and Counter Terrorism Financing (Prescribed Foreign Countries) Regulation 2018.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia’s AML/CTF regulator. Its remit includes administering the AML/CTF laws, detecting, deterring and disrupting criminal abuse of the financial system and gathering and analysing financial intelligence.
AUSTRAC has had its hands full lately with money laundering concerns. It has commenced Federal Court proceedings against Star Entertainment group entities and SkyCity Adelaide, both of which provide gaming and related services, for alleged serious and systemic non-compliance with the AML/CTF laws. It has entered an Enforceable Undertaking from ING Bank entities for self-reported shortcomings in their compliance with the AML/CTF laws and has ordered the appointment of an external auditor to corporate bookmakers, Sportsbet and Bet365 to assess their compliance with the AML/CTF laws.
The AML/CTF laws are detailed and comprehensive. An outline of the principal requirements of those laws follows.
What entities and persons are covered by the AML/CTF Act?
The AML/CTF Act applies to ‘reporting entities’. ‘Reporting entity’ is defined as “…a person who provides a designated service”. A ‘designated service’ is also defined and comprises various financial services of the kind usually provided by banks and other financial institutions, bullion services, gambling services and services prescribed by regulation. The AML/CTF Act also regulates digital currency exchange providers. The so called ‘tranche 2’ reforms that would see real estate agents, lawyers, accountants, and trust and company service providers become reporting entities are yet to be implemented.
What compliance obligations apply to a reporting entity?
Reporting entities have several compliance obligations. They must:
enrol with AUSTRAC;
adopt and maintain an AML/CTF program;
provide annual reports to AUSTRAC;
keep specified records; and
report suspicious matters, threshold transactions of A$10,000 or more and all international funds transfer instructions.
The AML/CTF Act prescribes three types of AML/CTF programs: the standard program for individual entities, a joint program for entities in a designated business group and a special program that applies to the holders of an AFSL and arranges for a person to receive a designated service from another reporting entity.
An AML/CTF program, other than a special program, must consist of a Part A, the primary purpose of which is to identify, mitigate and manage the ML/TF risk arising from the provision of a designated service and Part B, which is concerned with customer identification procedures. A special program need only consist of a Part B. Further details as to what must be included in Part A and Part B can be found in the AML/CTF Rules.
Extraterritoriality
The AML/CTF Act applies to Australia’s external territories and subject to the need for a ‘geographical link’ to Australia, applies to acts, omissions, matters and things outside Australia. The ‘geographical link’ requires the designated service to be provided at or through a permanent establishment of a person in Australia, to an Australian resident and the service is provided at or through a permanent establishment of the resident in a foreign country or to the subsidiary of a company that is an Australian resident and the service is provided at or through a permanent establishment of the resident in a foreign country.
AUSTRAC’s Enforcement Powers
Where a breach of the AML/CTF laws occur or there is a concern about a reporting entity’s compliance with those laws, AUSTRAC has a number of options available to it. As mentioned in the Introduction, AUSTRAC can commence Federal Court proceedings seeking civil penalty orders, enter an Enforceable Undertaking, or require the appointment of an external auditor. It can also issue an infringement notice (to pay a specified penalty) or remedial directions (to take steps to comply), require a ML/TF risk assessment to be carried out and refuse, cancel or suspend the registration of a remittance service provider or a digital currency exchange provider.
Criminal law offences
In addition to the offences prescribed by the AML/CTF Act, numerous other money laundering offences are prescribed in Part 10.2 Division 400 of the Criminal Code Schedule to the Criminal Code Act 1995 (Cth). The penalties are significant involving imprisonment and/or fines that are determined having regard to the sum laundered and the defendant’s state of mind (intentional, reckless or negligent).
Conclusion
AUSTRAC is a very active regulator and has successfully achieved some ‘eye watering’ monetary penalties against well-known businesses. Expect more of the same as AUSTRAC continues to investigate and act against the scourge that is money laundering.