Ahead of the full
statutory review of Australia's anti-money laundering and
counter-terrorism financial laws, the AUSTRAC Chief Executive
Officer has amended the Anti-Money Laundering/Counter-Terrorism
Financing Rules (AML/CTF Rules) in relation to the Customer
Due Diligence (CDD) requirements.
The FATF identified certain deficiencies relating to the CDD
requirements under Australia's AML/CTF regime, including the
lack of any requirements to:
take reasonable measures to understand the ownership and
control structure of a customer;
identify and verify the beneficial owners of a customer;
identify and verify the settlor of a trust;
take specific additional measures for customers (or beneficial
owners of those customers) who are PEPs; and
collect information on the purpose and intended nature of the
Following receipt of stakeholder submissions in relation to the
discussion paper, a draft Amendment Instrument was released for
consultation between 9 December 2013 to 24 January 2014.
AUSTRAC notes a third revised version of the draft Amendment
Instrument was released for public consultation in March 2014 with
submissions not requiring any further changes. This version is now
the finalised and registered Amendment Instrument.
The Amendment Instrument includes (without limitation) the
following substantive amendments to the following chapters of the
Key terms and concepts
New definition of 'beneficial owner', removing the
previous limitation to companies and extending the obligation
regarding identification to all customer types.
New definition of 'politically exposed person' which
includes (without limitation) an individual who holds a prominent
person or function in a government body (such as a government
minister, senior foreign representative or a chief executive of any
State enterprise) or an international organisation (one that is
established by a formal political agreement) and any immediate
family member or close associate of such a person.
Clarification that the new CDD requirements regarding settlors,
beneficial owners and PEPs only apply to those persons becoming
customers after 1 June 2014.
New requirement to collect and verify the full name of the
settlor of the trust unless an exception applies (such as the
settlor contribution being under the $10,000 threshold or where the
settlor is deceased).
New procedures to require collation and verification of
identification information of each beneficial owner. However,
reporting entities may assume the customer and beneficial owner are
the same unless there are reasonable grounds to consider otherwise
in light of money laundering / terrorism financing
(ML/TF) risks or if exceptions apply.
New procedures regarding identification and verification of
PEPs, including requirements to include in the AML/CTF program
appropriate risk management systems to determine whether a customer
(or beneficial owner) is a PEP either before providing a designated
service or as soon as practicable afterwards. More stringent
requirements apply to foreign PEPs and those domestic PEPs and
international organisation PEPs that are considered high ML/TF
Special AML/CTF programs
Related amendments to clarify the legal powers relating to the
identification and verification requirements for a beneficial owner
of a customer as the beneficial owner is not a customer of a
Chapters 8 and 9
Part A of a standard AML/CTF program (or for entities which
have formed designated business groups, Part A of a joint AML/CTF
New requirement for reporting entities to understand the nature
and purpose of their business relationships with customers,
including consideration of the control structure of any
non-individual customers such as trusts and companies.
New version of the ongoing CDD requirements to reflect the
requirements applying to both customers and the beneficial owners
of those customers (including PEPs). These requirements include
Know Your Customer requirements in relation to beneficial
Record keeping and updating requirements;
an enhanced CDD program that must be applied to foreign PEP
customers (or customers with foreign PEP beneficial owners);
a range of enhanced CDD measures relating to beneficial owners
such as identifying the source of funds.
New provisions to allow the use of disclosure certificates for
the identification of beneficial owners in specified circumstances
such as when the reporting entity has determined that the
information cannot otherwise be reasonably obtained or
The Amendment Instrument also makes amendments to privacy
notices contained in the AML/CTF Rules and to the definitions of
"certified copy" and "certified extract"
contained in Chapter 1.
TIMING AND REFORM IMPLEMENTATION
The amendments relating to CDD will commence on 1 June 2014 with
an implementation period extending to 31 December 2015.
There are policy principles1 in place to provide an
assisted compliance implementation period. The principles are
designed to provide comfort to reporting entities that certain
enforcement actions (such as the application for a civil penalty
order or an injunction) will not be taken by AUSTRAC during the
implementation period for breaches of the new CDD requirements if
the entity (or its designated business group if the entity is a
member of such a group) has taken reasonable steps to implement the
new requirements during the implementation period. These steps may
complying with the new CDD requirements as soon as practicable
in relation to persons who become a customer between 1 June 2014
and 1 January 2016; and
establishing a transition plan before 1 November 2014,
sufficiently resourcing and monitoring the implementation of the
We are available to provide you with further information or
guidance about the CDD reforms or the AML/CTF regime more
generally. Please contact a team member listed in this publication
for further information.
ASIC chairman confirmed that ASIC will continue its tough stance against suspected insider trading.
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