|2. Legal System and Related Institutional Measures|
|Criminalisation of Money Laundering (R.1 & 2)|
Improve implementation of the money laundering offence: provide incentive to its investigators and prosecutors to prosecute money laundering cases as separate and serious offences.
States and Territories should all adopt the national model) to allow them a broader ability to prosecute and convict for money laundering.
|Criminalisation of Terrorist Financing (SR.II)|
Criminalise the collection or provision of funds for an individual terrorist, as well as the collection of funds for a terrorist organisation.
|Confiscation, freezing and seizing of proceeds of crime (R.3)|
Other States and Territories that have not yet adopted similar civil forfeiture schemes should consider doing so.
Consider civil forfeiture for instrumentalities of crime.
|Freezing of funds used for terrorist financing (SR.III)|
Amend regulations to cover where the obligations of SRIII exceed the requirements of the Resolutions—i.e., specifying that obligations apply to funds of terrorists and those who finance terrorism, outside of the context of specific terrorist acts
Outreach further to DNFBPs to ensure that those sectors are aware of their obligations and procedures for complying.
|The Financial Intelligence Unit and its functions (R.26, 30 & 32)|
AUSTRAC is encouraged to seek direct access to additional law enforcement data sources as this non-financial data will also enhance their intelligence analysis capability.
AUSTRAC is encouraged to expand their team of financial analysts.
AUSTRAC should continue to seek and encourage regular feedback from partner agencies on their performance and on the benefits and results achieved by partner agencies through use of the FTR information.
AUSTRAC in consultation with partner agencies should consider how to share information/results more effectively with reporting entities.
AUSTRAC and APRA should negotiate a formal information sharing arrangement similar to those memorandums of understanding with other government agencies under which each organization is required to use its best endeavours to provide information which is likely to assist the other agency in carrying out its particular regulatory function.
|Law enforcement, prosecution and other competent authorities (R.27, 28, 30 & 32)|
The investigative and prosecutorial authorities need to focus more on investigating and prosecuting ML and not just predicate offences. Australian authorities are encouraged to continue to make this a priority.
There is also a need for Australian authorities to keep clearer statistics for investigations and prosecutions of the ML offence at the commonwealth level.
There is also a need for Australian authorities to ensure adequate statistics are maintained with respect to money laundering (investigations, prosecutions, convictions, property seized, etc.) at the State/territory level.
Consider establishing an AML working group with State, Territory and federal representatives from government to regularly discuss issues of common interest such as statistic gathering and develop approaches for dealing with emerging issues.
|3. Preventive Measures: Financial Institutions|
|Risk of money laundering or terrorist financing|
|Customer due diligence, including enhanced or reduced measures (R.5 to 8)|
In general, the regime could be made simpler and contain a more direct obligation to identify and verify customers.
Loans should not be excluded from CDD requirements.
The definition of “cash dealer” or otherwise obliged reporting entities should be extended to include the full range of financial institutions as defined in the FATF recommendations.
The scope of “account” should be extended to capture a wider range of products, services or business activity so that CDD applies for all cases of establishing business relations.
Australia should amend its legislation to remove the possibility of accounts operating below the threshold of AUD 1,000/ 2,000 without any verification requirements.
The Regulation 4(1)(i) of the FTR Act not requiring existing clients of over 36 months to be reexamined for identity and verification purposes should be repealed.
Financial institutions should be required to apply CDD requirements to existing customers on the basis of materiality and risk.
While Australia has a system to identify customers (but not beneficial owners) of occasional cash transactions above AUD 10,000, verification requirements should be clearer.
Australian legislation should be amended to require identification of those occasional transactions that exceed the USD/EUR 15,000 which are not cash transactions.
Australia needs to require financial institutions to identify occasional customers as contemplated in SRVII for domestic transfers and in the cases where there is a suspicion of money laundering or terrorist financing.
The acceptable referee method should be substantially tightened or even removed except for exceptional cases where reliance on other identification methods is not possible.
The 100-point check should be strengthened by placing reliance on identification documents or methods of proven acceptability, which should exclude identification references, for example.
Create a general obligation to identify and verify the details of the beneficial owner, in respect of all customers; oblige financial institutions to determine whether the customer is acting on behalf of another person, and if so, take reasonable steps to verify the identity of that other person.
For customers that are legal persons, financial institutions should be required to take reasonable measures to understand the ownership and control structure and determine who are the natural persons that ultimately own or control the customer and gather information on the directors and the provisions regulating the power to bind the entity.
Tighten the use of third parties to complete verification of signatories as currently contained in Regulation 5.
Require financial institutions to: obtain information on the purpose and intended nature of the business relationship, obtain information on the purpose and intended nature of the business relationship, conduct on-going due diligence of the business relationship, and keep CDD data up-to-date.
In the cases where adequate CDD data is not obtained, financial institutions should be required to consider filing a suspicious transaction report.
Adopt requirements for financial institutions to perform enhanced due diligence for higher risk categories of customers, business relationships, and transactions.
Adopt requirements for PEPs as contemplated in Recommendation 6.
Adopt measures for correspondent relationships as contemplated in Recommendation 7.
Require financial institutions to have policies in place or take such measures as may be needed to prevent the misuse of technological developments in money laundering or terrorist financing.
The FTR Act should be amended to provide specific, clear and effective CDD procedures that apply to non-face to face customers.
|Third parties and introduced business (R.9)|
Financial institutions should be required to: immediately obtain the identification data from referees; take adequate steps to satisfy themselves that copies of identification data and other relevant documentation relating to CDD requirements will be made available from the third party upon request without delay.
Financial institutions should be required to satisfy themselves that the third party is regulated and supervised (in accordance with Recommendation 23, 24 and 29), and has measures in place to comply with, the CDD requirements set out in R.5 and R.10.
|Financial institution secrecy or confidentiality (R.4)|
|Record keeping and wire transfer rules (R.10 & SR.VII)|
Broaden the scope of record-keeping requirements to include all financial institutions as defined in the FATF Recommendations. Clarify provisions to ensure that requirements apply to all account files and records of business correspondence.
Australia should adjust its legislation and implement measures of SR VII to require that:
financial institutions verify that the sender’s information is accurate and meaningful and include the account number;
full originator information, in addition to being sent to AUSTRAC, also be included in the wire transfer instruction itself, and that similar obligations also apply to domestic transfers.
intermediary financial institutions maintain all the required originator information with the accompanying wire transfer.
beneficiary financial institutions have risk-based procedures in place for dealing with incoming transfers that do not have adequate originator information.
‘non-routine transactions are not batched where this would increase the risk of money laundering or terrorist financing’.
|Monitoring of transactions and relationships (R.11 & 21)|
Adopt legally enforceable regulations or guidelines establishing an explicit obligation for all financial institutions to perform the elements required by Recommendation 11.
Adjust legislation to clarify obligations under Recommendation 21 in its Guidelines and Information Circulars and making these measures legally enforceable.
|Suspicious transaction reports and other reporting (R.13-14, 19, 25 & SR.IV)|
Amend the FTR Act to apply to all financial institutions as defined in the FATF Recommendations.
Expand the definition of the FT offence (to include the provision/collection of funds for an individual terrorist and the collection of funds for a terrorist organisation) so as to ensure that transactions related to these activities is reportable.
AUSTRAC could provide more sanitised examples of actual money laundering cases and/or information on that decision or result of an STR filed.
|Cross-border declaration or disclosure (SR.IX)|
Amend legislation to cover incoming and outgoing cross-border transportations of bearer negotiable instruments.
|Internal controls, compliance, audit and foreign branches (R.15 & 22)|
Impose obligations for all cash dealers to ensure that the proposed controls, policies and procedures cover, inter alia, CDD obligations, record detection, the detection of unusual and suspicious transactions, and the reporting obligations, designation of a AML/CFT compliance officer at the management level; an adequately resourced and independent audit function, ongoing employee training, and adequate screening procedures.
Require branches and subsidiaries to apply the higher AML/CFT standard, to the extent that the laws of the host country allows.
In the event where a foreign branch or subsidiary is unable to observe appropriate AML/CFT measures because this is prohibited by local (i.e. host country) laws, regulations or other measures, those financial institutions should be required to inform Australian authorities.
Require financial institutions to pay particular attention that the principle is observed wherewith to branches and subsidiaries in countries which do not or insufficiently apply the FATF Recommendations.
|Shell banks (R.18)|
Prohibit financial institutions from entering into, or continuing, correspondent banking relationships with shell banks and require financial institutions to satisfy themselves that respondent financial institutions in a foreign country do not permit their accounts to be used by shell banks.
|The supervisory and oversight system - competent authorities and SROs Role, functions, duties and powers (including sanctions) (R. 23, 30, 29, 17, 32, & 25).|
Foster greater formal co-operation amongst relevant financial sector supervisors and regulators on AML/CFT issues and operational developments going forward.
Develop an on-going and comprehensive system of on-site AML/CFT compliance inspections across the full range of financial institutions.
Institute an administrative penalty regime under which administrative penalties can be imposed on regulated entities and persons who are materially non-compliant in respect of their obligations under the FTR Act.
It should also be provided that a failure or wilful disregard of FTR Act obligations would constitute a ground for declaring a director, manager or employee of a cash dealer to be in breach of fit and proper norms, with the resultant consequences.
Inspections powers in the FTR Act should also be amended to expressly include such generally accepted standard inspection powers such as checking policies and procedures, sample testing, or the investigation of any other issue required by the FTR Act.
There should also be a provision clarifying that offences by a cash dealer in specific contravention of Australia’s AML/CFT legislation can result in the cancellation of a licence or revocation of authorisation held by that person or body corporate cash dealer.
Remedy the current limitation on AUSTRAC’s ability to share information with APRA.
For AUSTRAC to be an effective AML/CFT regulator under the current FATF standards, substantial dedicated financial resources must be directed toward the Reporting and Compliance section to increase staff numbers, to train existing staff and to embark on a targeted compliance drive amongst cash dealers through actual audit inspections in increased numbers.
There remains a distinct need for an enhancement of supervisory skills and training pertaining to the conduct of on-site inspections and enforcement-related activities.
Australia needs to develop a system to license and/or register all remittance dealers and bureaux de change. Australia also needs to extend licensing requirements to the remaining financial institutions not covered by current arrangements.
AUSTRAC should issue further guidance on the other AML/CFT preventative measures.
|Money value transfer services (SR.VI)|
Australia should require all MVT service operators to be licensed or registered, and AUSTRAC should maintain a comprehensive list of such service providers and their details;
Australia should therefore revise the FTR Act accordingly and subject MVT service operators to comprehensive AML/CFT requirements (the full scope of Recommendations 4-11, 13-15, 21-23, and SR VII).
Australia should also require MVT service operators to maintain a current list of their agents and make these available to AUSTRAC.
While AUSTRAC has invested considerable effort to locate and educate MVT operators so as to bring them into the reporting regime, AUSTRAC or another competent authority needs to go beyond education visits and fully supervise these entities, including full on-site inspections.
|4. Preventive Measures: Non-Financial Businesses and Professions|
|Customer due diligence and record-keeping (R.12) (Applying R.5, 6, 8-11, 17)|
Australia should bring in legislative changes to ensure that all DNFBPs have adequate CDD and record-keeping, and transaction monitoring obligations in the situations required by Recommendation 12.
Appropriate sanctions should be adopted for non-compliance, including a regime of administrative sanctions.
|Suspicious transaction reporting (R.16) (Applying R. 13-15, 17, 21)|
The scope of FTR Act needs to be enhanced so as to bring all types of DNFBPs under the STR regime. A regime of administrative sanctions should also be considered for DNFBPs for non-compliance with reporting obligations.
DNFBPs should be required to establish and maintain internal procedures, policies and controls to prevent ML and FT, and to communicate these to their employees. These procedures, policies and controls should cover, inter alia, CDD, record retention, the detection of unusual and suspicious transactions and the reporting obligation. DNFBPs should be required to maintain an independent audit function, establish ongoing employee training.
Australia should compel DNFBPs to pay special attention to transaction involving certain countries, make their findings available in writing, and apply appropriate counter-measures. Information Circulars issued for DNFBPs in this area would need to be transformed into legally enforceable circulars.
|Regulation, supervision and monitoring (R.17, 24-25)|
Australia should introduce administrative sanctions for breaches of AML/CFT requirements by all DNFBPs, once they are made subject to the FTR Act or other AML/CFT requirements.
The scope and coverage of reporting entities should be enhanced to include DNFBPs enabling AUSTRAC or SROs to regulate and supervise such entities from AML/CFT perspective.
Competent authorities such as AUSTRAC or SROs should establish guidelines that would cover the full range of DNFBP and assist them to implement and comply with their respective AML/CFT requirements.
|Other designated non-financial businesses and professions (R.20)|
|5. Legal Persons and Arrangements & Non-Profit Organisations|
|Legal Persons – Access to beneficial ownership and control information (R.33)|
Australia should consider broadening its requirements on beneficial ownership so that information on ownership/control is more readily available in a more timely fashion. This could include, for example, restricting the use of nominee directors and shareholders, or obliging legal persons to record the information on beneficial ownership in its register.
|Legal Arrangements – Access to beneficial ownership and control information (R.34)|
Improve the processes in place to enable competent authorities to obtain or have access in a timely fashion to adequate, accurate and current information on the beneficial ownership and control of legal arrangements, and in particular the settlor, the trustee and the beneficiaries of express trusts. Australia should enact more comprehensive measures to require that this data be collected or otherwise ensure that it can be made available.
|Non-profit organisations (SR.VIII)|
Australia should consider more thoroughly reviewing the adequacy of laws and regulations in place to ensure that terrorist organisations cannot pose as legitimate non-profit organisations.
Australia should give further consideration to implementing specific measures from the Best Practices Paper to SR VIII or other measures to ensure that funds or other assets collected by or transferred through non-profit organisations are not diverted to support the activities of terrorist organisations.
|6. National and International Co-operation|
|National co-operation and coordination (R.31)|
Improve the level of co-operation and co-ordination between AUSTRAC, ASIC, and APRA, and also to enhance co-ordination at the policy level, possibly through the establishment of a formal national co-ordination mechanism.
|The Conventions and UN Special Resolutions (R.35 & SR.I)|
Impose stricter customer identification (beneficial ownership) requirements for accounts and transactions in financial institutions as stipulated in Article 18 of the CFT Convention.
|Mutual Legal Assistance (R.32, 36-38, SR.V)|
Consider, on a timely basis, entering into further agreements for co-ordination of asset sharing, as this may be needed by other countries in order to share and receive proceeds from confiscated property.
Specifically criminalise the collection of funds for terrorist organisations and the provision/collection of funds involving individual terrorists, to ensure that the discretionary grounds of dual criminality is not used in the future to refuse legal assistance requests involving these crimes.
|Extradition (R.32, 37 & 39, & SR.V)|
Specifically criminalise the collection of funds for terrorist organisations and the provision/collection of funds involving individual terrorists, to ensure that the dual criminality requirement in current law could not prevent the extradition of those who have engaged in these acts.
|Other Forms of Cooperation (R.32 & 40, & SR.V)|
Australia is compliant with Recommendation 40. Although AUSTRAC does not need an agreement to share information, AUSTRAC should consider initiating exchange instruments to formalise exchange of AML/CFT regulatory information with foreign supervisors.