Independent AML/CTF Review and Audit

The AML/CTF regime is central to Australia's efforts to prevent criminals from profiting from their unlawful activity and to prevent funds from reaching terrorist organisations.

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) place responsibilities on Australian entities that provide any designated services listed under section 6 of the AML/CTF Act. These entities generally provide financial, gambling, bullion or digital currency exchange services to detect and deter money laundering and terrorism financing. The Act ensures that businesses take appropriate and efficient steps to ensure that their clients are not money laundering and terrorism financing while contributing to public confidence in the Australian financial system.

A Risk Assessment is a Reporting Entity’s foundational document which assesses the risks and vulnerabilities of being exposed to money laundering or terrorist financing.

A Reporting Entity’s Programs must be based on the risks assessed in its Risk Assessment and must set out internal policies, procedures and controls which will manage and mitigate money laundering and terrorist financing. There are three types of AML/CTF Programs: ‍ Standard program – applies to individual reporting entities; Joint program – applies to reporting entities that are members of a “designated business group”; and Special program – applies only to holders of an Australian Financial Services License (AFSL) offering a particular kind of designated service. ‍ AML/CTF Programs have two key parts: Part A, relating to the identification, management and reduction of the risk of ML/TF (not required for a special program); and Part B, relating to customer identification and verification procedures i.e KYC.

You must decide how often reviews are done. How you decide depends on: ‍ • The size of your business or organisation. • What kind of business or organisation you have. • How complex your business or organisation is. • Your level of money laundering/terrorism financing risk. ‍ High-risk organisations should have independent reviews done at least every two to three years.

The AML/CTF Rules are subsidiary legislative instruments made under the AML/CTF Act. The AML/CTF Rules provide the detail for the broader obligations set out in the AML/CTF Act. Their official title is the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1).

Since 2007, Tranche 2 of the legislation has been under consideration, which would expand the entities required to comply with AML/CTF obligations to include real estate agents, lawyers, book-keepers, accountants, and trust/company service providers (also known as gatekeepers).

The Attorney-General has announced a public consultation regarding proposed anti-money laundering and counter-terrorism financing (AML/CTF) regime reforms in Australia. The objective of the proposed reforms is to ensure that the regime conforms to international standards. industry can enhance their understanding of their obligations and compliance.

As a reporting entity, your business will be required to implement risk management programs to identify and mitigate potential money laundering and terrorist financing risks. This includes conducting customer due diligence (CDD) on clients, monitoring transactions and client behaviour for suspicious activities, and reporting any suspicious matters to AUSTRAC.

To better understand and fulfil your obligations under Tranche 2, you can refer to official guidance from AUSTRAC, engage in industry-specific training, and seek advice from legal or financial professionals with expertise in AML/CTF compliance. One AML can also help you understand and meet your AML/CFT obligations. We provide robust, cost-effective, and seamless solutions. Get in touch with us today.

There are opportunities for your business to showcase its commitment to compliance and ethical practices. By diligently following the regulations, you can enhance your reputation as a trustworthy partner for your clients, reducing the risks associated with money laundering and terrorist financing activities.

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Tranche 2 will require accountants to be more vigilant in their dealings with clients engaged in financial transactions susceptible to money laundering. You will need to perform detailed assessments of your client's activities and keep a close eye on any unusual or large transactions. Additional training and software tools may be necessary to meet compliance requirements.

Lawyers and conveyancers will need to play a more active role in identifying and preventing money laundering and terrorist financing. You will have to conduct comprehensive client due diligence, particularly for high-value transactions, and report any suspicious activities to AUSTRAC.

Real estate professionals will face increased scrutiny in their transactions. You will need to conduct thorough checks on buyers and sellers, verify their identities, and assess the nature of the transactions more diligently. This may lead to longer transaction times and additional administrative burdens.