The "ongoing customer due diligence" component of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime commences on 12 December 2008.
Those entities who are a Reporting Entity will now be required to monitor customers to whom they provide designated services and their transactions on an ongoing basis.
The AML Rules specify three mandatory components of "ongoing customer due diligence":
- Collection and verification of additional "know
your customer" (KYC) information:
Reporting Entities are already required to collect and verify information about a customer's identity before providing a designated service to that customer. As part of the "ongoing customer due diligence" obligations, Reporting Entities must also determine when it is necessary to collect further KYC information, or update or verify existing KYC information. All Reporting Entities must address this in their AML/CTF programs. - Transaction monitoring program:
A Reporting Entity must include in Part A of their AML/CTF program a transaction monitoring program which identifies transactions that appear to be "suspicious". Each Reporting Entity must decide on the most appropriate form of transaction monitoring for their business. Reporting Entities may adopt computer based systems or paper monitoring programs. - Enhanced customer due diligence program:
A Reporting Entity must also include in Part A of their AML/CTF program an enhanced customer due diligence program which the Reporting Entity will apply when there is high ML/TF risk or a reportable suspicious matter has arisen.
The AML/CTF governing body, AUSTRAC, requires that the Reporting Entity be compliant with these obligations by 12 March 2010, at the very latest, and will require the Reporting Entity to apply its transaction monitoring program, once implemented, retrospectively to those transactions that occurred from 12 December 2008.
AUSTRAC expects reporting entities who are implementing complex computerised "ongoing customer due diligence" procedures which will not be fully functional on 12 December 2008, to utilise manual or other existing tools during the interim period.
The "ongoing customer due diligence" obligations do not apply to an Australian financial services licence holder who arranges for a person to receive a designated service pursuant to item 54 of table 1 in section 6 of the AML/CTF Act.
Michael Levy, a lawyer at Madgwicks, has acted for a broad range of clients on a variety of matters including general corporate and commercial advice, restructure and business sales, Trade Practices Act and ASX compliance.
Rick Goldberg, a Partner at Madgwicks, has over 18 years experience in corporate and commercial law. His particular areas of practice include funds management, superannuation and regulatory compliance, and his clients include ASX companies, industry super funds, fund managers, IDPS operators, stockbrokers, as well as family owned private businesses.
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.
