Impact of Tranche 2 AML/CTF laws on Australia’s high-value dealers
Impact of Tranche 2 AML/CTF laws on Australia’s high-value dealers
In the face of global concerns about money laundering and terrorism financing, the Australian government passed the Anti-Money Laundering and Counter-Terrorism Financing Act in 2006. It addressed so-called ‘high-risk’ sectors like banks and other financial institutions, cash-carrying services, bullion dealers, casinos, remittance service providers, and stored value card providers.
However, after the legislation was passed, numerous weaknesses were discovered. A key omission was that the laws failed to include various professions that operated outside the traditional financial system. This list included real estate professionals, lawyers, accountants, dealers in high-value items like precious metals and stones, and trust and company service providers.
Collectively, this grouping is referred to as designated non-financial businesses and professions, or DNFPs. They have also been labelled ‘gatekeeper’ and ‘tranche two’ entities.
Under potential future laws, these professionals will be required to implement risk management programs, conduct customer due diligence, monitor customer behaviour and transactions for potentially suspicious activity, and register with AUSTRAC (Australian Transaction Records and Analysis Centre).
High-value dealers included in AML/CTF Tranche 2 scope
The reason that high-value dealers were included on the list for inclusion in expanded Tranche 2 AML/CTF laws is that high-value items like jewellery, precious stones, antiques and collectibles, fine art, yachts, and luxury cars can allow large sums of cash to be disguised and enjoyed anonymously.
Building, bathroom, and kitchen supplies are also considered high-value goods, as criminals can use illicit funds to buy renovation supplies along with real estate purchases. High-value dealers, as defined under Tranche 2, include businesses that transact in high-value goods like jewellery, precious stones, precious metals, and luxury goods.
Potential impact on Australian high-value dealers
The roll-out of Tranche 2 AML/CTF laws has a number of implications for high-value dealers. While the laws add compliance and administration costs, they also offer some benefits. The following outcomes are likely to face high-value dealers because of new AML/CTF legislation:
1. Enhanced Customer Due Diligence (CDD) requirements. Tranche 2 imposes enhanced CDD obligations on high-value dealers to make sure they identify and verify their customers better. This includes implementing more thorough customer identification procedures, assessing a customer's risk profile, and continuously monitoring the business relationship. High-value dealers will be required to maintain detailed records of these activities and report any suspicious transactions to AUSTRAC.
2. Greater reporting obligations. Under Tranche 2, high-value dealers must report certain transactions to AUSTRAC, especially those that raise any suspicions about money laundering or terrorist financing. This includes transactions that involve large amounts of cash or display unusual patterns or characteristics. Failure to comply with these reporting obligations may result in severe penalties and reputational damage.
3. Greater compliance measures. To meet the requirements of Tranche 2, high-value dealers must make sure they implement robust compliance programs that align with Australia’s AML/CTF laws. This includes establishing internal policies and procedures, appointing a designated compliance officer, conducting regular risk assessments, providing training to relevant staff, and carrying out independent AML/CTF reviews.
4. Ongoing compliance and training. High-value dealers are expected to set up and keep robust AML/CTF compliance programs that are tailored to their specific business risks. Regular employee training on AML awareness and reporting obligations is also expected, to ensure compliance requirements are met.
5. Enhanced penalties and enforcement. Tranche 2 of Australia’s AML/CTF laws introduce stricter penalties for non-compliance. Any high-value dealers failing to comply could face significant financial penalties and imprisonment if they’re found to be involved in money laundering or terrorist financing activities. Regulatory authorities have also been given increased powers to enforce AML laws and conduct investigations to identify and prosecute any violations.
6. Improved reputation. Complying with Tranche 2 will foster a reputation of trustworthiness and accountability, which could attract more legitimate customers and business partners.
7. Enhanced confidence. Stringent AML measures will mean that customers can be more confident that high-value dealers are taking the necessary precautions to prevent criminal activities.
How One AML can remove the stress from your AML auditing
Australia's new AML/CTF laws represent a big step forward in the fight against money laundering and terrorist financing, and it is crucial that high-value dealers comply with these laws to reduce the risks of money laundering and preserve their business reputation.
If your business is affected by Tranche 2, One AML can help you understand and meet your AML/CTF obligations. We provide robust, cost-effective, and seamless solutions. Get in touch today.