At present, Australian reporting entities who provide designated services must have an Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) programme contained as a written document of policies, procedures and controls that outlines how the entity complies with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) and Anti-Money Laundering and Counter-Terrorism Financing Rules Instruments 2007 (No. 1) (Cth) (AML/CTF Rules).

An AML/CTF programme must address how the entity identifies, mitigates and manages the risk of its products or services being used for money laundering or terrorism financing.

AML/CTF Programme Breakdown

Australia’s AML/CTF regulator, AUSTRAC provides that an AML/CTF programme consists of two parts:

  • Part A must include processes and procedures to help you identify, mitigate and manage the money laundering and terrorism financing risks that you may reasonably face.
  • Part B is focused on the ‘know your customer’ (KYC) procedures for identifying customers and beneficial owners including those that are politically exposed persons (PEPs), and verifying their identity.

Part A – Processes and Procedures on Money Laundering and Terrorism Financing Risks

The necessary processes and procedures on Money Laundering (ML) and Terrorism Financing (TF) risks requires a compliant reporting entity to address five key obligations:

  1. Determine the extent of an entity’s exposure to reasonable risk and appropriate mitigating measures (ML/TF Risk Assessment);
  2. Implement controls to mitigate and manage identified ML/TF risk (Risk Management Process);
  3. Implement employee training to inform employees on AML/CTF statutory obligations, the consequences of non-compliance, the types of ML/TF risks involved, and the processes and procedures to be followed (AML/CTF Risk Awareness Training);
  4. Address the specific processes to be undertaken by the entity in high risk ML/TF circumstances (Enhanced Customer Due Diligence Programme); and
  5. Implement a manual or automated transaction monitoring programme to identify suspicious customer transactions (Transaction Monitoring).

Part B – Know Your Customers' Procedures

Whether customers engage in one-off transactions or a series of consecutive transactions, a compliant reporting entity’s AML/CTF programme must:

  1. Identify all of its customers;
  2. Assess whether any customers are politically exposed persons;
  3. Assess any transactions dealing in or from high-risk countries and regions; and
  4. Reasonably verify all information.

If your business is required to implement an AML/CTF programme or you are unsure if you provide one of the designated services, contact one of or expert Commercial Lawyers to discuss.

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