AML/CTF reforms – what you need to know

This interest is spurned from the expectation that Australia’s AML/CTF regime is set for a shake-up this financial year, with second stage consultation expected to lead to significant reforms in the very near future. This reform comes at an opportune time, as it is our understanding that the Financial Action Task Force (FATF) is set to return to Australia to examine our performance and provide further recommendations for improvement. 

The FATF review appears to be in response to the FATF’s recent report, Horizontal Review of Gatekeepers’ Technical Compliance Related to Corruption (Report), which damningly gave three jurisdictions – Australia, the United States and China (excluding Hong Kong) – a 0% score in its assessment of FATF member compliance with the FATF Recommendations relating to ‘gatekeepers’ (such as accountants, lawyers and real estate agents). This score represents Australia’s failure (since 2003) to implement any preventative measures previously required by FATF Standards in relation to gatekeepers. 

In response to the release of the Report, the Attorney-General acknowledged the Report has ‘singled out Australia for our continued non-compliance with global [AML/CTF] standards’. We expect the outcome of the Report will greatly inform and motivate the proposed legislative reforms in the Australian AML/CTF legal landscape, particularly in relation to bringing gatekeepers into Australia’s legislative regime.

For the many Australian businesses that will be captured by these ‘tranche 2’ reforms (eg accountants, lawyers, real estate agents), this likely reform provides an excellent opportunity to assess current procedures or prepare for potential change. To do this, it may be helpful to implement practices now in line with expected procedures, so it becomes ‘business as usual’ before the full weight of the new law comes into play. As lawyers, we are seeing the industry come together to find ways to prepare for the regime, and to also learn from lawyers from other jurisdictions who are subject to AML/CTF laws.

In other developments, AUSTRAC is proposing amendments to the AML/CTF Rules to apply the same relief from collecting and verifying trust-related information afforded to customers who are custodians to customers who are a ‘nominee of a custodian’. The proposed amendment will be limited to a related body corporate of a ‘custodian’ who meets the existing definition of ‘custodian’ under the AML/CTF Rules. The previous omission of nominees of custodians in the AML/CTF Rules is described by AUSTRAC as an oversight. We think these technical amendments will be welcomed by fund managers whose investors in their products are Australian nominees of global custodians.

In case you missed it, there has also been a timely reminder to maintain appropriate ongoing due diligence and adequate board and senior manager oversight, with SkyCity Adelaide being ordered to pay a $67 million penalty for such contraventions. AUSTRAC has also highlighted how foreign students are being used as ‘money mules’ through ‘bank accounts, physical cash, cashier’s cheques, digital currency, prepaid debit cards, or remittance service providers’.

We are working with industry groups and with clients to keep abreast of developments and getting ahead of the curve of reform. Keep up-to-date with AML/CTF news through our website updates and check out the upcoming release of our AML/CTF podcast, which will summarise some of our most frequently asked questions, including common risks and failures, AML/CTF program recommendations and efficiencies, independent reviews, outsourcing, the A to Z of KYC, and legislative reforms.