New Anti-Money Laundering laws

New laws, with a rapidly looming deadline for compliance, aim to protect the integrity of Australia’s financial system.

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the AML/CTF Act) was introduced on December 12, 2006. Implementation of the provisions of the Act were staggered over two years to give industry more lead time for some of the systems changes that they may require.

On June 12, 2007 the requirement for businesses, including SMEs, to report on their implementation progress was introduced with the compliance report due by March 31, 2008. On December 12, 2007 the most significant provisions came into effect, with the requirement to implement an AML/CTF program. The reform strategy is a major step towards protecting the integrity of Australia’s financial system, and preventing and detecting money laundering and terrorism financing.

The Act represents the first phase of reforms and applies to banking, non-bank financial services, money transfer and bullion and gambling businesses that provide certain ‘designated services’. The designated services include opening an account, accepting deposits, making a loan, issuing a debit card, issuing travellers cheques, remittance services, funds management, superannuation, life insurance, financial planning, and stockbroking. Businesses, ranging from large companies to SMEs, and individuals who provide such services are ‘reporting entities’ under the Act.

The Act provides for a risk-based approach to regulation where reporting entities determine the best way to meet their obligations under the Act and the AML/CTF Rules. The risk-based approach is based on the reporting entity’s own assessment of the risk they may face in providing a designated service.

Under the Act, AUSTRAC continues its role as Australia's financial intelligence unit. Importantly, AUSTRAC now also has an expanded role as the national AML/CTF regulator with supervisory, monitoring, and enforcement functions over all reporting entities.

Reasonable Steps

Under the Policy (Civil Penalty Orders) Principles 2006 issued on January 31, 2007, entities are expected to have taken ‘reasonable steps’ to fully meet their ongoing statutory obligations. By December 12, 2007 entities should have been either fully compliant or making steady progression towards meeting their AML/CTF program and know your customer (KYC) obligations. If not fully compliant, entities should have at least allocated appropriate resources to identify risks and implement appropriate systems and controls, and to determine milestones to ensure full compliance as early in 2008 as possible.