Independent AML Review

Understanding independent AML/CTF reviews in Australia

Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act 2006 places obligations on businesses to combat money laundering and the financing of terrorism. According to Australia’s financial crime watchdog, AUSTRAC, one of these obligations is that Part A of your AML/CTF program must be independently and regularly reviewed.

Businesses within the financial, gambling, and remittance sectors, as well as bullion dealers, must establish comprehensive AML programs that include thorough customer due diligence (CDD), transaction monitoring, and the reporting of suspicious activities.

The reason behind a regular, independent AML review of your AML/CTF program is to give an objective assessment of whether you’re complying with your program and that it:

  • properly addresses your money laundering and terrorism financing risks
  • complies with your legal obligations 
  • is working as it should.

Reporting entities can use their understanding of their AML/CTF risks to decide on the specific actions and methodology they need in order to complete a review. They can also determine the scope of the review, in consultation with their independent reviewer. 

These independent reviews help assess whether previous audit issues have been addressed. A key outcome of an independent AU review by AML/CTF experts is to give businesses confidence that their practices are compliant and robust and that they’re contributing to the overall strength of Australia’s AML ecosystem.

Qualified AML/CTF experts needed for independent AML review

In Australia, independent AML reviews are usually done by qualified and experienced professionals that specialise in AML compliance, risk assessment, and auditing, such as One AML. These experts give unbiased assessments of your AML practices to ensure you comply with regulatory requirements, and they also identify areas for improvement.

AUSTRAC sets specific criteria for those that may provide an independent AML review of AML/CTF reviews. They must:

  • understand your business or organisation 
  • understand ML/TF risks 
  • must not be involved in any part of developing your program, including assessing your money ML/TF risk, developing controls, or implementing or maintaining your program. 

AUSTRAC points out that the reviewer can be someone within or outside your organisation. An example of an internal reviewer is an auditor in your business who doesn’t hold a compliance role. However, they must know and understand AML/CTF thoroughly.

An external reviewer could be an AML/CTF consultant, a lawyer, or an accountant. No matter who you choose (provided they meet the necessary criteria), you must make sure there are measures in place to ensure their independence. 

In assessing their independence, you could consider if they belong to a professional body that requires its members to meet relevant professional standards, if they’re influenced by those who were involved in your AML/CTF risk assessment or developed your program, and how well the person understands and applies AML/CTF obligations relative to your business or organisation.

Factors affecting frequency of independent AML review

While you’re responsible for deciding how often reviews are done, you should take the following factors into account:

  • The size of your business or organisation 
  • What kind of business or organisation you have 
  • The complexity of your business or organisation
  • Your level of money laundering/terrorism financing risk. 

High-risk organisations should have independent reviews done at least every two to three years but if your business or organisation has changed significantly you may need reviews done more often. 

You may also need reviews more regularly if you have, or previously had, challenges complying with your AML/CTF obligations. In this scenario, it may pay to engage the services of an AML/CTF consultant, to help you put compliance policies, procedures, and controls in place that are specific to your business.

When selecting a firm for your independent AML review, it's important to consider their expertise, experience, reputation, and knowledge of your industry. They should also be leaders in AML/CTF audit and consultancy services, have a strong understanding of Australian AML regulations, and be able to provide you with actionable recommendations for improvement.

The scope of an independent Au AML/CTF review is comprehensive, and it includes policy assessments, process evaluations, technology systems, training protocols, and compliance monitoring. Data used in the assessment can be drawn from your documentation, interviews with your key staff, and an examination of transactions.

5 key steps in an independent AML review

An independent AML/CTF review in Australia involves a holistic evaluation of various components:

components:

  1. Initial assessment: Reviewers analyse your current AML/CTF policies and procedures to ensure they align with regulatory requirements.
  2. Customer Due Diligence (CDD): This aspect scrutinises the process you follow in verifying and monitoring customer identities, assessing risk assessments, and enhanced due diligence.
  3. Transaction monitoring and reporting: The effectiveness of your transaction monitoring systems and the accuracy when reporting suspicious activities to AUSTRAC are also evaluated.
  4. Training and awareness: An independent AML review assesses the training programmes you use to educate your employees about AML/CTF practices and their role in preventing money laundering.
  5. Gaps and deficiencies: Reviewers identify gaps, weaknesses, and areas for improvement, and provide recommendations to address the risks.

The dynamic and ever-evolving nature of global financial crime means that Australian businesses and organisations must constantly be vigilant to money laundering and terrorism financing risks. Independent AML reviews are important for ensuring your compliance with Australia’s AML/CTF laws and assessing the effectiveness of these measures.

The findings of independent AML/CTF reviews are not only for businesses and organisations, however, but also for Australian regulatory authorities. Sharing these findings with AUSTRAC builds cooperation between businesses and regulators and helps them work together to combat money laundering and terrorism financing in this country.

How One AML can help with your independent AML review

An independent review will give you an unbiased evaluation of your AML/CTF program, identify any vulnerabilities, and recommend how you can improve it. One AML can help you understand and meet your AML/CTF obligations and conduct an independent AML review of your program.

Get in touch today to see how we can help.

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