Australia: New AML / CTF Obligations Coming Into Force in December 2008

Last Updated: 14 December 2008
Article by David Selig and Nathan Greenfield

On 12 December 2008 certain parts of the Anti-Money Laundering and Counter Terrorism Financing Act 2006 (Cth) ("Act") will come into force. The provisions include Division 6 of Part 2 concerning ongoing customer due diligence and Divisions 1 to 4 and Division 6 of Part 3 dealing with reporting obligations. These parts are the last of the provisions of the Act to come into force. The other provisions came into force at six and twelve month intervals from 13 December 2006. The Australian Transaction Reports and Analysis Centre (AUSTRAC) also has – and has already exercised – the power to issue legally binding rules under section 229 of the Act.


The provisions of the Act coming into force will impose new obligations on "reporting entities". A "reporting entity" is any entity that provides a "designated service", being the provision of financial, bullion, gambling or money transfer services.

From 12 December 2008, reporting entities will be required to monitor its customers in relation to the provision of its services with a view to identifying, mitigating and managing the risk that provisions of its services might involve or facilitate money laundering or financing of terrorism. This ongoing customer due diligence requirement is comprised of three mandatory components, being "know your customer" or "KYC" requirements, monitoring customer transactions and undertaking enhanced customer due diligence.

Reporting entities will need to ensure that they:

  1. collect and verify information about a customer's identity;
  2. determine when it may be necessary to collect further KYC information or update or verify existing KYC information;
  3. establish a transaction monitoring program which should be able to detect complex, unusual large transactions and unusual patterns of transactions which have no apparent economic or lawful purpose; and
  4. establish an enhanced customer due diligence program which can be applied when the reporting entity determines that there is a high money laundering or terrorism financing risk or a suspicious matter has occurred.

The Part 3 provisions that are coming into force will require reporting entities to give AUSTRAC reports about suspicious matters, transactions involving the transfer of money of $10,000 or more (whether in physical currency or e-currency) and international funds transfer instructions.

Suspicious Matters

Reports about suspicious matters must be reported:

  • generally, within 3 business days; or
  • if the suspicion relates to the financing of terrorism, within 24 hours

after the day on which the reporting entity forms the relevant suspicion. Whether a matter is suspicious and therefore reportable will depend upon whether the reporting entity has a suspicion on reasonable grounds:

  1. about the person that the entity is dealing with;
  2. that the provision of the service is preparatory to the commission of an offence; or
  3. is relevant to an investigation or prosecution of an offence in Australia.

Given that a suspicion must be based on "reasonable grounds", the provisions in the Act allow an entity to investigate a customer's transactions or information before being required to make a report to AUSTRAC. The AUSTRAC Regulatory Guide states that the obligation to report a suspicion based on reasonable grounds means that the reporting obligation arises if a reasonable person would conclude from all the circumstances surrounding the provision or proposed provision of a designated service that a suspicious matter report would need to be submitted. This suggests that if a reporting entity does not have an actual suspicion based on reasonable grounds but should have had such a suspicion, then the reporting entity is required to report the matter.

AUSTRAC has taken the view that where a reporting entity uses an agent to provide a designated service and the agent forms a suspicion as to a relevant matter, that agent's knowledge is not to be imputed to the principal. In other words, the reporting entity must have actual knowledge. However, AUSTRAC has stated that if a reporting entity enters into any type of agency agreement, the agreement should expressly require the agent to immediately report any relevant suspicions to the principal.

In addition, the Act provides that AUSTRAC may make rules as to which matters may be taken into account in determining whether there are reasonable grounds for a reporting entity to form a suspicion of a relevant matter. The Act also requires that appropriate compliance programs are in place.

AML/CTF Programs

Since 2007, reporting entities have also been required to establish so-called "AML/CTF programs" as a way for reporting entities to identify, mitigate and manage the risk of their products or services. Each reporting entity must develop its own AML/CTF program based on:

  1. the risk profile of its customers;
  2. the risk of the designated service being used in contravention of the Act;
  3. the methods by which designated services are provided;
  4. risk profiles of foreign countries dealt with; and
  5. risks resulting from the provision of designated services through permanent offices in foreign jurisdictions.

Most AML/CTF programs must have two parts. Part A must set out procedures relating to such things as:

  • assessing the risk of products and designated services that a business provides;
  • screening employees prior to hiring and ongoing monitoring of staff; and
  • training employees in AML/CTF trends, risk-based processes and the consequences of non-compliance with the Act and the AML/CTF Rules issued by AUSTRAC.

Part B of the program requires specified procedures for establishing methods for identifying customers and their agents that will enable the reporting entity to be reasonably satisfied about a customer's true identity and to gather and validate minimum KYC information.

Compliance Reports

Under the Act, AUSTRAC has the power to require entities to provide compliance reports to demonstrate their compliance with the Act. The last compliance report was in respect of the 2007 calendar year. The Act provides that an entity must give a report even if to do so might tend to incriminate the entity or expose the entity to a penalty.

However, section 48(2) of the Act provides that, in most cases, a compliance report will not be admissible in evidence against the reporting entity in civil or criminal proceedings. Similarly, section 124 exempts most suspicious matter reports from being admitted in evidence in court or tribunal proceedings, subject to certain exceptions – such as where the reporting entity intentionally gives false or misleading information to AUSTRAC. The effect of these provisions is that if a reporting entity reports a suspicious customer to AUSTRAC and that customer subsequently claims civil damages from the reporting entity as a result of giving that report (e.g. for defamation), the customer is unlikely to be successful in such claim.

AUSTRAC has stated that it recognises that some entities may not be fully compliant with the provisions by 12 December 2008 but expects that entities will take reasonable steps towards compliance and be fully compliant by 12 March 2010 at the latest. However, AUSTRAC will require an entity that fails to implement any transaction monitoring program by 12 December to apply their monitoring program, once implemented, to those transactions that occurred between 12 December and when the entity began complying with its obligations under the Act.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions