In brief - A recently released guidance note by AUSTRAC specifies the level of transparency in transactions by specified reporting entities under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
Under the AML/CTF regime (the Anti-Money Laundering and Counter-Terrorism Financing Act 2006
) specified reporting entities which offer financial services, bullion, cryptocurrency or gambling services are required to develop and maintain an AML/CTF program and to report to AUSTRAC (Australian Transaction Reports and Analysis Centre) suspicious matters, threshold transactions and certain international funds transfer instructions.
AUSTRAC's task as a government financial intelligence agency is to monitor reported financial transactions and to ensure that reporting entities comply with AML/CTF requirements.
If an entity fails to comply with the AML/CTF requirements there can be serious consequences and significant penalties. Reporting entities must therefore be aware of the AML/CTF requirements and understand how AUSTRAC regulates reporting entities, to enable them to work with AUSTRAC to strengthen Australia's AML/CTF environment.
To foster transparency on how AUSTRAC regulates reporting entities AUSTRAC has recently released a guidance note
What does AUSTRAC's risk-based approach to regulation mean for reporting entities?
AUSTRAC applies a risk-based approach (similar to the ATO). The intensity of regulatory measures depends on the particular risk exposure of the entity and the level of compliance with their obligations.
To assess risk exposure AUSTRAC considers a range of internal and external inputs including the compliance history, suspicious matter reporting and information from partner agencies such as information about law enforcements about the entity and their customers in accordance with the following matrix:
How will AUSTRAC respond to non-compliance?
The general focus of AUSTRAC's regulatory activities is on cooperation with reporting entities to improve their understanding of money laundering-/terrorism finance risks and the quality of their reports.
If a reporting entity systematically fails to comply with their obligations then AUSTRAC will take enforcement actions against those entities.
AUSTRAC identifies failures through reporting and information from the reporting entity itself, or from partner agencies.
AUSTRAC also has the power to issue a notice compelling production of information and/or documents relevant to the operation of the AML/CTF.
If AUSTRAC considers that enforcement action represents the most appropriate response to identified non-compliance, it will consider:
- the nature of the non-compliance;
- the money laundering/terrorism financing risk associated with the reporting entity;
- the reporting entity's willingness and effort to comply;
- whether the failure was voluntarily reported and the likely consequences of the enforcement action, eg the impact on the reporting entity and broader reporting entity population.
In cases of minor and/or technical non-compliance AUSTRAC will usually cooperate with the reporting entity to enable it to respond and remediate issues in a timely fashion without commencing a formal enforcement action.
If AUSTRAC considers the non-compliance requires a move to formal enforcement action it will consider the following measures:
- Issuing an infringement notice;
- Issuing remedial directions, which require a reporting entity to take specified action to ensure compliance;
- Accepting an enforceable undertaking detailing the specific actions a reporting entity will commence or cease in order to comply with the AML/CTF Act.
- If the AUSTRAC CEO considers that a reporting entity has breached an enforceable undertaking the AUSTRAC CEO can apply to the Federal Court for orders requiring the reporting entity to comply with the undertaking;
- Seeking injunctions and/or civil penalty orders in the Federal Court;
- Referring a matter to the Commonwealth Director of Public Prosecutions for possible criminal prosecution.
AUSTRAC's stated position is to foster a good relationship with its reporting entities to effectively fight against money laundering and terrorism finance. AUSTRAC will avoid formal enforcement actions if appropriate. Nevertheless reporting entities have to make sure that they are meeting their requirements under the AML/CTF.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2020.