SCC Chartered Accountants

   

Clean hands or dirty money

The new process for cracking down on illegal financial transactions will affect us all in some way.

The new anti-money laundering and counter-terrorism financing (AML/CTF) reforms are very wide reaching. You will be affected if you are a customer of a bank, a credit union or a customer of any other financial services institution. Customers of businesses offering gambling services, such as casinos, clubs and pubs will also be impacted.

These businesses are considered to be reporting entities under the new law. Reporting entities are businesses that provide ‘designated services’ – that is, services which carry a risk of exposure to money laundering or terrorism financing

What is money laundering?

Money laundering is the process of disguising cash or property derived from illegal activities to make it appear as if it had been obtained from a legitimate source.  The proceeds of crime (dirty money) are mixed with legitimate income (clean money) to disguise the true origin of the money.  Money laundering creates a credible commercial reason for the existence of the money.

Background

According to money laundering experts the depth and length that money launderers will go to obtain illegal funds is astounding.  In December 2003 the Australian Government announced a review of Australia’s Anti-Money Laundering/Counter Terrorist Financing system as part of the implementation of international standards issued by the Financial Action Taskforce (FATF). The FATF is an international organisation concerned with strengthening AML provisions in the global financial system.

Following a lengthy consultation process, new laws were drafted (the AML/CTF Act) and came into being from 12th December 2007.

The new laws have been introduced to:

• Decrease the risk of Australian businesses being misused for the purpose of money laundering or financial crimes
• Improve Australia’s existing anti-money laundering and counter terrorism financing system, and
• Help law enforcement agencies gather information about possible criminal activity and terrorism.

What activities are covered?

Businesses, including professionals such as lawyers and accountants, become ‘reporting entities’ under the new laws only when they provide ‘designated services’.  Such services include opening an account, accepting money on deposit, making a loan, issuing, acquiring or disposing of a bill of exchange, a promissory note or letter of credit, issuing a debit or stored value card, issuing traveller’s cheques and sending and receiving electronic funds transfer instructions.

Other examples include making money or property available under a designated remittance arrangement, issuing or selling a security or derivative, accepting a contribution, rollover or transfer of a member of a superannuation fund and exchanging money.    

What does this mean to businesses that provide designated services?

From the 12th of December 2007 reporting entities are required to:

• Report suspicious matters
• Report suspected terrorism financing
• Conduct a customer identification procedure before arranging designated services for clients and customers

How does this affect customers, clients and users of designated services?

The impact on customers will depend on whether the customer’s use of the designated services outlined in the legislation falls into the low, medium or high risk category of a particular business.

Customer identification will only be required when the transaction value is in excess of nominated thresholds.

An underlying intention is to minimise the impact on every day dealings of every day people will being diligent and observant about other irregular or suspicious activities.