AML/ CTF Compliance Programme

Money laundering and the financing of terrorism has significant implications on legitimate business interests by allowing criminal activity to thrive. When coupled with the fact that Australia has a reputation as a high-integrity and low-corruption jurisdiction, this makes the country vulnerable to abuse. This is why it becomes all the more important for businesses to put in place effective Anti-Money Laundering and Countering of Terrorism Financing compliance programmes.

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 places obligations on Australian financial institutions and high-value dealers to detect and deter money laundering and terrorism financing. To this end, AML compliance programmes help detect, uncover and report suspicious activity including the underlying offences of money laundering and terrorist financing, such as securities fraud and market manipulation.

Why is an AML CTF Compliance Programme Necessary?

Given the increasing regulatory scrutiny related to AML issues and complex challenges faced by financial services organisations in this regard, institutions realise the importance of implementing and maintaining a robust AML program. The objective of an effective AML Compliance Programme is thus to mitigate financial risks for an organisation.

In the following paragraphs, we have put together a basic guide to help you get started with an AML Compliance Programme for companies in Australia. We recommend stopping by our post on the common AML CTF abbreviations for some background before you dive in.

Step 1. Conduct a Risk Assessment

Your organisation’s AML Compliance Programme must be developed following a risk assessment. As the name might imply, this risk assessment involves identifying and assessing the inherent threats that your business could reasonably expect to face from money laundering and/or terrorism financing.

While some businesses are concerned that a risk-based approach stops them from engaging in transactions or establishing business relationships with higher-risk customers, this is untrue. This approach only helps effectively manage and prioritise your response to money laundering and terrorism financing risks.

The AML CTF Act 2006 places obligations to have this risk assessment recorded in writing, along with a description of how the evaluation will be kept up to date. Note that this risk assessment must be independently audited by an appropriately qualified person every two years or at any other time at the request of your AML/CTF supervisor.

When identifying the risks that your organisation faces, it is important to consider aspects such as:

  • the nature, size and complexity of your business,
  • the products and services you offer,
  • the way you deliver your products and services,
  • the countries you deal with,
  • and the institutions you deal with,
  • the types of customers you deal with,

The above factors all influence how your business on-boards customers, and delivers your products. The answers to these factors will thus affect your business’s vulnerability to money laundering and terrorism financing.

Aside from this, ensure that the following questions and their corresponding answers are recorded:

  • Does your business have non-face-to-face customers (via post, telephone, internet or via intermediaries)?
  • Do you provide your products/services via the internet?
  • Does your business have indirect customer relationships (via intermediaries, pooled accounts, etc.)?
  • Do you provide your products/services via agents or intermediaries?  
  • Do you provide your products/services to overseas jurisdictions?
  • Are your customers considered trusts or other legal entities?  
  • Are these customers specified in the AML/CTF Act as requiring ECDD?  
  • Are these customers involved in occasional or one-off activities/transactions above a certain threshold?  
  • Do they use complex business structures that offer no apparent financial benefits?  
  • Are they PEP?
  • Are they a cash-intensive business?  
  • Do they have an unexplained or hard-to-verify source of wealth or source of funds?

Another factor to evaluate is country risk. According to official authorities such as the Financial Action Task Force, or FATF, a “high-risk” country has deficient money laundering countermeasures and a significant level of corruption. To help you determine country risk, Australia’s AML/CTF supervisors, AUSTRAC, have produced the country assessment guidelines.

Other information sources that can help you assess country risk include:  

  • FATF’s list of high-risk and non-cooperative jurisdictions,
  • FATF mutual evaluation reports,
  • European Union AML and tax blacklist,
  • Basel AML Index,  
  • United Nations Office on Drugs and Crime reports,
  • Transparency International Corruption Perceptions Index.

Step 2. Appoint an AML/CTF Compliance Officer

To oversee internal anti-money laundering policies and remain compliant with important regulations, banks, credit unions, and similar financial institutions are required to appoint an Anti-Money Laundering Compliance Officer. An AML/CTF Compliance Officer is generally an employee of the reporting entity that administers and maintains its AML/CTF programme.

Step 3. Conduct Employee Training:

Employee training must be carried out to ensure maximum compliance. Employees within the compliance and audit teams, senior management, and high-risk departments who come into direct contact with clients here will assume utmost importance in these training sessions.

Step 4. Develop and implement the AML/CTF programme

A robust programme must contain the procedures, policies and controls to manage and mitigate the risks identified in Step 1 effectively. For more information on preventive money laundering practices, be sure to read our blog posts with more comprehensive information.

With the frequent updates and amendments made to prevailing legislation, keeping up with your most recent obligations is important for you as a responsible business. In addition, carrying out an AML/CTF review is recommended to avoid penalties for non-compliance. Head on to our blog posts, where we talk about why your company needs an AML/CTF review.

We understand that AML/CTF is a complex topic with many parts. If you’re having trouble applying a feasible compliance programme to your organisation, feel free to reach out to us – we’d be happy to help! One AML Review is a team of specialised analysts here to guide you through the provisions.

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Disclaimer: This information is only to serve as a reference and guide for those living and doing business in Australia. It is not a substitute for the provisions or information in the “Anti-Money Laundering and Counter-Terrorism Financing Act 2006.” (AML CTF Act) or any of its allied statutes and provisions. The above information is not a substitute for independent, professional legal advice and is meant for general information only. The examples in the guidelines are merely suggestions, are not exhaustive, and are illustrative.