The amendments are part of a series of reforms stemming from the 2016 Report on the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Associated Rules and Regulations (Statutory Review Report).
Of particular interest are amendments impacting:
- customer identification procedures;
- correspondent banking relationships; and
- the offence of tipping off.
Ability to rely on third party customer verification
The existing core requirements relating to customer identification / verification and due diligence have been supplemented by expanding the circumstances in which reporting entities may rely on the customer identification and verification conducted by a third party. Of particular interest are amendments that:
- confer protection from liability on a reporting entity that has relied on a third party in respect of any isolated failures to conduct the requisite customer identification and verification (essentially a form of ‘safe harbour’), so long as certain criteria have been met; and
- entitle a reporting entity to rely on the customer identification and verification conducted by a third party in certain circumstances, in order to reduce the regulatory burden of performing customer due diligence, particularly for multinational corporations.
As these reforms are intended to facilitate more efficient information sharing between reporting entities and other bodies to ensure the proper identification of customers, reporting entities may now wish to consider whether it would be appropriate and beneficial to enter into written customer due diligence arrangements with other entities.
Correspondent banking relationships
Recognising that correspondent banking relationships are understood to pose increased money-laundering and terrorism-financing risks, the amendments supplement the existing restrictions on correspondent banking relationships involving shell banks by extending those restrictions to correspondent banking relationships with financial institutions that permit their accounts to be used by shell banks.
The amendments also remove a defence previously available, namely, that the reporting entity was not ‘reckless’ as to its correspondent banking relationships.
Businesses should ensure that their due diligence of potential and current correspondent banking relationships is sufficiently robust and includes consideration of whether the financial institution permits its accounts to be used by a shell bank.
Simplifying ‘tipping off’ restrictions
The amendments go some (albeit limited) way to simplifying the onerous ‘tipping off’ restrictions under section 123 of the AML/CTF Act, in response to a recommendation in the Statutory Review Report to provide greater clarity to reporting entities about their obligations.
Importantly, the amendments now better facilitate reporting entities in seeking legal advice and engaging external auditors, by expanding the exemptions available in those circumstances. They also expand the ability of reporting entities to share information to members of a corporate group outside of Australia subject to certain requirements and better enable them to communicate with law enforcement agencies who may have an interest in receiving information about suspicious activity.