Will you have AML transitional arrangements in place by 1 November 2014?

On 1 June 2014, new customer due diligence requirements were introduced to amend the Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 (No.1) (AML Rules).

The new AML customer due diligence requirements were previously summarised in our 18 June 2014 compliance update.

New customer due diligence requirements

In brief, key obligations under the new customer due diligence requirements include:

• requirements to identify and verify the identity of settlors of trust estates in certain circumstances;
• requirements to identify and verify the identity of beneficial owners of companies, trusts and partnerships. Broadly, beneficial ownership is defined in the AML Rules to include persons who directly or indirectly own 25% or more of an entity or persons who exercise operational or financial control over an entity;
• due diligence requirements for politically exposed persons. In particular, reporting entities must have processes in place to approve investment from high risk politically exposed persons such as ascertaining the source of wealth of the politically exposed person as well as board approval for investments; and
• requirements to take beneficial ownership into account when assessing money laundering risk levels for different customers and carrying out  ongoing customer due diligence procedures.

Under the transitional arrangements for the new customer due diligence requirements, reporting entities must:

• comply with the new customer due diligence requirements for high risk customers as soon as practicable; and
• either
  • comply fully with the new customer due diligence requirements by 1 November 2014; or
  • establish a transition plan before 1 November 2014. Where a transition plan is established by 1 November 2014, reporting entities will have until 31 December 2015 to fully comply with the new customer due diligence requirements.

What must you do?

Reporting entities intending to be fully compliant by 1 November 2014 will need to update their AML Program and their procedures for customer information collection, verification and ongoing customer due diligence including any application documentation before that date to achieve compliance.

Reporting entities intending to rely on the transitional arrangements to comply by 31 December 2015 must before 1 November 2014:

• establish a transition plan which specifies how the reporting entity will comply immediately with the new customer due diligence requirements for high risk customers and how it will achieve full compliance by 31 December 2015;
• obtain approval for the transition plan from the board or a similar governing body. For designated business groups (DBGs), approval for the transition plan must be obtained from the board of each member company in the DBG or a board with written authority from other member companies in the DBG to approve the transition plan;
• allocate sufficient resources to implement the transition plan;
• regularly monitor and report on implementation to the board of the reporting entity;
• on request provide a copy of the transition plan to AUSTRAC; and
• comply with the new customer due diligence requirements as soon as practically possible in part or in full.

Please contact us if you need assistance with updating your AML processes or implementing a transition plan.