andrew galvin - hwl ebsworth - in focus: anti-money laundering and counter-terrorism financing
TRANSCRIPT
[Insert Title]
Presented by [Insert Speaker]
[Insert date as: Day, # Month Year]
An>-‐money laundering Recent changes in context
Presented by Andrew Galvin
2 October 2014
169176671_1
1 4th round FATF Mutual Evalua9on Review
2 Australian Government Review of the AML/CTF regime
3 Changes to the AML/CTF Act so far
4 Recent changes to the AML/CTF Rules
Outline
Keeping up with the FATF Recommenda>ons
§ Crimes Legisla>on Amend’t (Serious & Organised Crime) Act (No. 2) 2010 § Redefined concepts for remiHance and stored value cards
§ Australian Transac>on Reports and Analysis Centre Supervisory Cost Recovery Levy (Consequen>al Amendments) Act 2011 § New Part 3A established the Repor9ng En99es Roll
§ CombaXng the Financing of People Smuggling & Other Measures Act 2011 § New Part 6 for regula9on of the remiHance sector § New Part 2 Div 5A -‐ access to credit reports for match/no match
§ Crimes Legisla>on Amendment (Law Enforcement Integrity, Vulnerable Witness Protec>on and Other Measures) Act 2013 § New part 17A for AAT review of AUSTRAC CEO decisions
Changes to the Act so far
Of the 70 chapters, the June 2014 changes relate only to: § Chapter 1 – defini9ons § Chapter 4 – iden9fica9on procedures § Chapter 5 – correspondent banking § Chapters 8/9 – standard / joint AML/CTF Programs § Chapter 15 customer due diligence § Chapter 30 disclosure cer9ficates
Recent changes to the AML/CTF Rules
Policy (Addi>onal Customer Due Diligence Requirements) Principles 2014 I, the Hon Michael Fayat Keenan MP, Minister for Jus9ce, give these Principles under sec9on 213 of the An#-‐Money Laundering and Counter-‐Terrorism Financing Act 2006 (the Act). Dated 15th May 2014 Michael Fayat Keenan Minister for Jus9ce 1. Name of Principles These Principles are the Policy (Addi9onal Customer Due Diligence Requirements) Principles 2014 2. Commencement The Principles commence on 1 June 2014 3. Enforcement ac>on (1) During the period commencing 1 June 2014, and ending on 31 December 2015, the AUSTRAC CEO may apply for a civil penalty order or an injunc9on, issue a remedial direc9on, or require an external compliance audit, in respect of a repor9ng en9ty for a contraven9on of a relevant provision (as described in the next subparagraph) only if the AUSTRAC CEO is sa9sfied that a repor9ng en9ty or, if the repor9ng en9ty is a member of a designated business group (“DBG”), its DBG has failed to take reasonable steps to comply with the relevant provision.
Assisted Compliance Period
(1) During the period 1 June 2014 to 31 December 2015, the AUSTRAC CEO may apply for a civil penalty order or an injunc9on, issue a remedial direc9on, or require an external compliance audit, in respect of a repor9ng en9ty for a contraven9on of a relevant provision only if sa9sfied that a repor9ng en9ty or …. its DBG has failed to take reasonable steps to comply with the relevant provision.
(2) Each customer due diligence requirement contained in the
Rules which commences to have effect on 1 June 2014 is a relevant provision.
3. Enforcement ac>on
§ whether complies as soon as prac)cable for new customers from 1 June 2014 to 1 January 2016 assessed to be high risk
§ establishes a transi9on plan before 1 November 2014 § obtains board / senior management approval § sufficiently resources implementa9on § regularly monitors and reports (internally) on implementa9on § provides a copy and progress update to AUSTRAC on request § complies with the relevant provisions as soon as can be
reasonably be accommodated through exis9ng opera9ons
Ma`ers to be considered – reasonable steps
PEPs, beneficial owners and KYC: June 2014 reforms
9 December 2013: draft Rules
5 March 2014: (final public) draft Rules
1 June 2014: New KYC standards commence
1 November 2014: Deadline for preparing and approving transition plan
1 January 2016: Deadline for full implementation and 'back-capture' of high risk customers to 1/6/14
§ Australian Government En9ty – now defined § Beneficial Owner – broadened in scope
§ extends to all forms or repor9ng en9ty – not just companies § means an individual who ul)mately owns or controls (directly or
indirectly) the customer § “Control” is defined widely within the defini9on of “beneficial owner” § “Owns” -‐ 25% direct/indirect – legal (not beneficial) ownership
§ Cer9fied Copy – expanded
Chapter 1 – changes to defini>ons
§ More prescrip9ve list of maHers to consider when assessing ML/TF risk § no longer just nature, size and complexity of business and type of ML/TF risk Now: § Customer types (including beneficial owners/PEPs) § Source of funds / source of wealth § Nature and purpose of business rela9onship with customers § Control structure of non-‐individuals § Types of designated services § Method of delivery § Foreign jurisdic9ons
Chapter 4-‐ Changes to ID procedures
§ SeHlors of trusts § AML Programs to include procedures to collect (4.4.3(5)) and to verify
(4.4.5(5)) the full name of the seHlor of a trust except where: § seHlor’s material asset contribu9on is less than $10,000 (usually easy) § seHlor is deceased (difficult) § simplified trustee verifica9on procedure is applied (eg registered/wholesale
MIS, government super funds)
Chapter 4 – Changes to ID procedures cont…
§ New Part 4.12 – AML Program to include appropriate systems and controls to determine the beneficial owner of each customer and to carry out an iden9fica9on procedure for each beneficial owner (collect and take reasonable steps to verify full name and either DOB and residen9al address.
§ Only individuals are taken to beneficial owners § For customers who are individuals, it is assumed the customer and
beneficial owner is one and the same – this will not always be the case because beneficial ownership can be based upon control (eg guardian/administrator)
§ Not applicable if simplified company/trust verifica9on procedures applied or customer is Australian Government En9ty or foreign listed company
Chapter 4 changes cont…– beneficial owners
§ As for customer KYC informa9on, AML/CTF Program must include appropriate risk-‐based systems and controls to determine whether in addi9on to the basic KYC informa9on, other informa9on should be collected and verified (eg aliases, ci9zenship, occupa9on, transac9on/rela9onship purpose, income, source of funds or financial posi9on).
§ reliable independent documenta9on / electronic data to be used § safe harbour procedure available where customer and beneficial owner
are medium or lower ML/TF risk – but not if the beneficial owner is a PEP.
Chapter 4 changes cont… -‐ beneficial owners
§ If the repor9ng en9ty is unable to ascertain beneficial ownership, it must instead iden9fy and take reasonable measures to verify other persons: § for companies -‐ any individual who can exercise >25% vo9ng rights or power
of veto or who holds the posi9on of senior managing official § for trusts -‐ any person who has the power to appoint or remove trustees § for associa9ons or registered co-‐ops – any individual who can exercise >25%
vo9ng rights or power of veto or who on dissolu9on would be en9tled to 25% or more of the property or who hold the posi9on of senior managing official
Chapter 4 changes cont… -‐ beneficial owners
§ New Part 4.13 – AML Program to include appropriate risk management systems to determine whether a customer or beneficial owner is a PEP
§ “before or as soon as reasonably prac>cable aeer the designated service” § Not a risk-‐based requirement – this is an absolute requirement
Chapter 4 changes cont…. -‐ PEPs
“Primary” PEPs an individual who holds a prominent public posi9on or func9on in a government body or an interna9onal organisa9on, including: § Head of State § government minister or equivalent poli9cian § senior government official § Judges (High Court, Federal Court, Supreme Court or foreign/int’l equivalent) § governor of a central bank or equivalent § senior foreign representa9ve, ambassador or high commissioner § high-‐ranking member of the armed forces § Board chair, chief execu9ve, or chief financial officer of, or any other posi9on
that has comparable influence in, any State enterprise or int’l organisa9on
Chapter 4 changes cont…. – What is a PEP?
“Secondary” PEPs: § a spouse § de facto partner § child or child’s spouse or de facto partner § parent
§ close associate being any individual known to have: § joint beneficial ownership of a legal en9ty / arrangement with the primary PEP § sole beneficial ownership of a legal en9ty / arrangement known to exist for
the benefit of the primary PEP
Chapter 4 changes cont… – What is a PEP?
§ domes>c PEP means a PEP of an Australian government body § foreign PEP means a PEP of a government body of a foreign country § interna>onal organisa>on PEP means a PEP of an int’l organisa9on
§ interna#onal organisa#on means an organisa9on: (a) established by formal poli9cal agreement by two or more countries and that
agreement has the status of an interna9onal treaty; and (b) recognised in law of the countries which are members of the organisa9on
Chapter 4 changes cont… – other PEP concepts
What if a customer or beneficial owner is a PEP? § FATF requirements replicated:
§ For domes9c PEPs and interna9onal organisa9on PEPs, determine whether they high ML/TF risk, in which case other measures apply including: § senior management approval § reasonable measures to establish source of wealth/funds § comply with Chapter 15 (Ongoing CDD)
Chapter 4 changes cont… PEPs
8.1-‐ risk based approach to ML/TF risk 8.2-‐ risk awareness training 8.3-‐ employee due diligence program 8.4-‐ oversight by boards and senior management 8.5-‐ AML/CTF Compliance Officer 8.6-‐ Independent Review 8.7-‐ AUSTRAC feedback 8.8-‐ Permanent Establishments in a foreign country 8.9-‐ Repor>ng obliga>ons
Chapter 8 & 9 changes -‐ standard and special AML/CTF Programs
8.1.4 For the purposes of these Rules, in iden9fying its ML/TF risk a repor9ng en9ty must consider the risk posed by the following factors: (1) its customer types, including any poli9cally exposed persons; (2) the types of designated services it provides; (3) the methods by which it delivers designated services; and (4) the foreign jurisdic9ons with which it deals.
8.1.5 Part A must be designed to enable the repor9ng en9ty to: (1) understand the nature and purpose of the business rela9onship with its
customer types, including, as appropriate, the collec9on of informa9on relevant to that understanding; and
(2) understand the control structure of non-‐individual customers; (3) iden9fy significant changes in ML/TF risk for the purposes of its Part A
and Part B programs, including: (a) risks iden9fied by considera9on of the factors in paragraph 8.1.4; and (b) risks arising from changes in the nature of the business rela9onship,
control structure, or beneficial ownership of its customers
(4) recognise such changes in ML/TF risk for the purposes of the requirements of its Part A and Part B programs; and
(5) assess the ML/TF risk posed by: (a) all new designated services prior to introducing them to the market; (b) all new methods of designated service delivery prior to adop9ng them; (c) all new or developing technologies used for the provision of a
designated service prior to adop9ng them; and (d) changes arising in the nature of the business rela9onship, control
structure or beneficial ownership of its customers.
Changes to rule 8.1.5 / 9.1.5
§ offences rela9ng to giving false or misleading informa9on (s. 136) or producing false or misleading documents (s. 137) apply to informa9on given through customer due diligence
§ Ongoing CDD obliga9ons extended to beneficial owners of all customer classes (not just of companies) § Part A of an AML/CTF Program must include appropriate risk-‐based systems
and controls to enable the repor9ng en9ty to determine the circumstances in which further KYC informa9on or beneficial owner informa9on should be collected or verified for ongoing CDD purposes
§ Repor9ng en99es must undertake reasonable measures to keep, update and review the documents, data or informa9on collected for iden9fica9on procedures [more explicit than the former requirement to simply have risk-‐based systems and controls in rela9on to upda9ng and verifying KYC informa9on for ongoing CDD purposes]
Chapter 15 changes – ongoing CDD
§ Under exis9ng Pt. 15.9, an enhanced CDD program must be applied when ML/TF risk is high, a suspicion has arisen or a party is present in, or incorporated in a prescribed country.
§ Under the changes: § “high risk” status should be should be measured with regard to beneficial
ownership including by any domes>c or interna>onal organisa>on PEP. § Enhanced CDD must also be applied automa9cally when a designated service
is being provided to a customer who is, or who has a beneficial owner who is, a foreign PEP.
§ The enhanced CDD measures have been expanded to include ascertaining a beneficial owner’s source of wealth and transac9on funds.
§ When a customer or beneficial owner is a foreign PEP, it is mandatory to: § iden9fy beneficial owner’s source of wealth and transac9on funds; and § seek management approval
Chapter 15 changes cont….
§ offences rela9ng to giving false or misleading informa9on (s. 136) or producing false or misleading documents (s. 137) apply to informa9on given through disclosure cer9ficates
§ More restric9ve use of disclosure cer9ficates (1) the repor9ng en9ty has determined that the informa9on cannot
otherwise be reasonably obtained or verified; (2) the informa9on to be provided or verified is reasonably required
under the AML/CTF program applying to the repor9ng en9ty; (3) the repor9ng en9ty has applied the relevant procedures and
requirements in its AML/CTF program, but has been unable to obtain or verify the informa9on; and
(4) the informa9on is one or more of the items of informa9on specified in paragraphs 30.3 to 30.9.(1).
Chapter 30 changes – disclosure cer>ficates
§ The maHers to be included in disclosure cer9ficates have not changed except that full name and residen9al address are required for each beneficial owner. § name/address of each beneficial owner § Details of foreign registra9on of foreign companies registered in Australia § Details of name and registra9on / incorpora9on of foreign companies not
registered in Australia § KYC informa9on about trusts § KYC informa9on about partnerships § KYC informa9on about associa9ons § KYC informa9on about co-‐opera9ves
Chapter 30 changes – disclosure cer>ficates
§ Any ques9ons?
An>-‐money laundering Recent changes in context