The Government has released the Report on the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and associated rules and regulations.

The AML review report concludes Australia’s AML/CTF regime remains relevant and appropriate but recommends the AML/CTF Act should be simplified to enable reporting entities to better understand and comply with their AML/CTF obligations.

The review has overlapped with an evaluation by the FATF of Australia’s compliance with the international AML/CTF standards. The FATF published its report in April 2015.

The recommendations include widening the scope of the law to cover new technologies and payment systems and to adopt the technology neutrality principle and to simplify customer due diligence.

The report also recommends that AML/CTF obligations under the AML/CTF Act, Rules and Regulations should be proportionate to the ML/TF risks faced by reporting entities.

The Government will consider the recommendations of the report before announcing its response.

Regulated services
The Report recommends that:

• The AML/CTF Act should be amended to delete the collection and delivery of physical currency as a regulated service.
• AUSTRAC should conduct an assessment of the ML/TF risks posed by the issuing, selling and cashing/redeeming of traveller’s cheques and whether these services should continue to be regulated under Australia’s AML/CTF regime.
• AUSTRAC should conduct an assessment of the ML/TF risks posed by stored value cards and the continued appropriateness of the thresholds in the stored value card designated services.
• AUSTRAC should conduct an assessment of the ML/TF risks posed by the services provided by cheque cashing facilities with a view to regulating these services under the AML/CTF Act if they are determined to pose a high ML/TF risk.
• AUSTRAC should closely monitor the ML/TF risks associated with new payment types and systems (including front-end applications), to ensure gaps do not develop in Australia’s AML/CTF regime.
• The AML/CTF Act should be amended to ensure that digital wallets are comprehensively captured by AML/CTF regulation.
• The AML/CTF Act should be amended to expand the definition of e-currency to include convertible digital currencies not backed by a physical ‘thing’.
• The AML/CTF Act should be amended to regulate activities relating to convertible digital currency, particularly activities undertaken by digital currency exchange providers.
• AUSTRAC should identify designated services that pose a high ML/TF risk when provided to an Australian customer by an offshore-based business.

Customer due diligence
The Report recommends that:

• The AML/CTF Rules for customer due diligence should be rationalised and simplified as a priority, using plain language to facilitate ease of use and supplemented by enhanced guidance.
• AUSTRAC should consider and explore other reliable options, including those utilising new technologies, as alternatives to the existing minimum know your customer requirements for individual customers.
• The safe harbour and simplified verification procedures under the AML/CTF Rules should be rationalised into a single simplified customer due diligence procedure.
• AUSTRAC should consider expanding the availability of simplified customer due diligence to designated services and customers that have a minimal or low ML/TF risk.
• The AML/CTF Rules should explicitly allow for use of self-attestation to identify individual customers using a risk-based approach only as a measure of last resort where a customer’s identity cannot otherwise be reasonably obtained or verified.
• The AML/CTF Rules should allow reporting entities to accept disclosure certificates certified by an acceptable officer using a risk-based approach.
• The AML/CTF Rules should be amended to require reporting entities to conduct specific enhanced customer due diligence measures (in line with the FATF standards) at the time of pay out where the beneficiary or beneficial owner of a life insurance policy is a politically exposed person and a higher ML/TF risk is identified.
• The AML/CTF Act should be amended to expand the ability of reporting entities to rely on customer identification procedures performed by a third party, subject to conditions.
• The AML/CTF Act and Rules should be amended to merge and streamline the Part A and Part B requirements for AML/CTF programs into a single requirement for reporting entities to develop, implement and maintain an AML/CTF program that is effective in identifying, mitigating and managing their ML/TF risks.

Cross-border reporting
The Report recommends that the current cross-border reporting regime for physical currency and bearer negotiable instruments in the AML/CTF Act should be replaced with a consolidated requirement to report ‘cash’ of AUD10,000 or more. For the purposes of Part 4 of the AML/CTF Act, cash should be defined as:
• physical currency
• bearer negotiable instruments
• bullion, and
• an object or instrument specified in the AML/CTF Rules.

The current definition of a bearer negotiable instrument under the AML/CTF Act should be amended to include:
• gaming chips or tokens
• plaques or letters of credit, and
• an object or instrument specified in the AML/CTF Rules.

The Report also recommends that the Attorney-General’s Department, AUSTRAC and the Department of Immigration and Border Protection should investigate the feasibility of establishing cross-border reporting obligations in relation to stored value cards.

Extending regulated entities
The Report recommends that the Attorney-General’s Department and AUSTRAC, in consultation with industry, should:
(a) develop options for regulating lawyers, conveyancers, accountants, high-value dealers, real estate agents and trust and company service providers under the AML/CTF Act, and
(b) conduct a cost-benefit analysis of the regulatory options for regulating lawyers, accountants, high-value dealers, real estate agents and trust and company service providers under the AML/CTF Act.

While the Review recommends the FTR Act and Regulations be repealed it recommends the AML/CTF Act and Rules be amended to retain reporting requirements in relation to traveller’s cheques, motor vehicle dealers and solicitors while the broader consideration of AML/CTF Act regulation of these businesses occurs.