Australia: Anti-Money Laundering / Counter – Terrorism Financing Act – New Developments

There have been a number of recent amendments to the Anti-Money Laundering / Counter-Terrorism Act (AML / CTF Act). Many reporting entities are confused by the changes which include:

• an obligation on all reporting entities to enrol with AUSTRAC;
• an obligation on persons providing a "designated remittance arrangement" to register with AUSTRAC; and
• the introduction of a new AUSTRAC levy from 1 January 2012.

AUSTRAC has written to all reporting entities which have previously lodged compliance reports to advise them of these changes.

In addition, reporting entities should be aware of the amendments to the AML / CTF Act which are designed to assist reporting entities wishing to rely on electronic verification of customer identity using information stored on a credit file.

Enrolment with AUSTRAC

Reporting entities are now required to enrol with AUSTRAC (via AUSTRAC On-Line) within 28 days of commencing to provide a "designated service" under the AML / CTF Act. Reporting entities are obliged to ensure that their enrolment details are kept up-to-date.

These new obligations will enable AUSTRAC to maintain a public register of all reporting entities. This will be publicly available.

When enrolling with AUSTRAC, reporting entities must provide details about the entity's annual earning as well as details about your business structure and the designated services you provide. Reporting entities must now keep a record of the annual financial statements used to calculate your earnings information

Remitter registration

In addition, from 1 November 2011, all providers of remittance services must apply to be registered with AUSTRAC.

Importantly, the definition of "designated remittance service" in section 10 of the AML / CTF Act has been amended. The new broader definition effectively captures the activities of all non-ADIs who:

1. accepts an instruction to transfer of money or property under the remittance arrangement; or
2. makes money or property available, or arranges for it to be made available, under the remittance arrangement.

A "remittance arrangement" is any arrangement that is for the transfer of money or property.

All remittance providers must apply to be registered with AUSTRAC. The timeframe for registration will depend on the role played by the "reporting entity" in carrying out the "remittance arrangement", however, in many cases registration will need to be in place before 30 April 2012.

It is important to note that AUSTRAC may take up to 90 days to approve an application. Further, if the application is not approved within that time it will automatically be rejected.

AUSTRAC levy

Commencing in the 2011 – 2012 financial year, AUSTRAC will recover the costs of its supervisory activities from the business it regulates in the form of a levy.

The levy will be a single annual charge made up of three components:

1. a base component;
2. a large entity component; and
3. a transaction reporting component.

Other than ADIs, many reporting entities in the mortgage and finance industry will only be required to pay the "base component".

The estimated base component for 2011 – 2012 is $284 (the final amount will be set by Ministerial Determination and is expected to be set in January 2012).

Electronic customer identification

Electronic identification of individuals for the purposes of the AML / CTF Act has always been difficult. In the past, many reporting entities have expressed a desire to identify clients using information contained in a credit report (such as those reports provided by VEDA), however, this has been problematic because of the Privacy Act restrictions on using "credit information".

The AML / CTF Act now allows a reporting entity to use an individual's credit information file for the purposes of verifying the individual's identity provided strict processes are complied with.

The reporting entity must first obtain specific, express consent from the individual authorising it to verify their identity using a credit information report.

VEDA will only be able to provide the reporting entity with an overall assessment of whether the information provided by the reporting entity matches information held by VEDA on a credit reporting file. (eg VEDA can say something like "Complete match" or "Partial match" but will not be able to provide specific details such "there was a match on the name but not on the residential address").

Neither the reporting entity nor VEDA are permitted to use information about an individual's credit history to verify the individual's identity.

If the reporting entity is unable to identify the individual from the credit reporting file, the reporting entity must provide the individual with an alternative method of verifying their identity.

Reporting entities that wish to rely on the new provisions relating to the use of information stored on a credit file to verify the identity of an individual should ensure that their AML / CTF Program and privacy consents allow for this method of customer identification verification.

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This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.