Anti-Money Laundering and Counter Terrorism Financing -

Anti-Money Laundering and Counter Terrorism Financing

Author: Ita Wong

The Anti-Money Laundering and Counter Terrorism Financing Act 2006 (“Act”) was first introduced in Australia in 2006 to provide for measures to detect, deter and disrupt money laundering, the financing of terrorism, and other serious financial crimes.

Fundamentally, AML/CTF laws were established to stop criminal acts from generating profits derived from drug trafficking, human trafficking and corruption. In essence, money laundering is a process that criminals use to hide the monetary proceeds of their underlying criminal activity.

The money is often transferred through complex transactions or seemingly legitimate business sources and made to appear as ‘clean’ proceeds thus disguising these monies from their illegitimate origin.

On the other hand, counter terrorism laws were established to prevent funding acts of terrorism with the objective of maintaining the integrity of national security and protecting Australians from harm. Terrorism financing involves three stages: raising funds, transferring funds to a terrorist network or organisation and using such funds to purchase weapons or covering living expenses for a terrorist cell.

The Act regulates financial, gambling, remittance and bullion sectors that provide ‘designated services’ listed in the Act. This piece of legislation also regulates AUSTRAC’s (Australian Transaction Reports and Analysis Centre) functions. AUSTRAC collects information from entities they regulate for the purposes of identifying financial transactions linked to crimes, including money laundering, terrorism financing, organised crime, child exploitation and tax evasion.

Reporting Entities and their obligations

If your business activities involve providing financial services, gambling and digital currency exchange sector, it may be construed as providing ‘designated services’ for the purposes of the Act as these business activities are considered to pose a risk for money laundering.

A “reporting entity” means a person who provides a designated service and they are required to comply with various provisions of the Act, The Financial Transaction Reports Act 1988 (Cth), and Privacy Act 1988 (Cth) and must be entered on the AUSTRAC Reporting Entities Roll.

Some of the common obligations that relate to Reporting Entities are outlined below:

A reporting entity is obligated to carry out verification of identity of their customers before providing a designated service to the customer – there is a responsibility to carry out ongoing customer due diligence.
Submit any suspicious activity known as suspicious matter reports (SMR) to AUSTRAC within three days if, while dealing with a customer, they reasonably suspect a matter may be related to an offence, tax evasion or the proceeds of crime. An SMR must be submitted to AUSTRAC if a reporting entity suspects a customer is involved in financing of terrorism, unless an exemption applies.
Cross-border movements of monetary instruments must be reported to the AUSTRAC CEO, a customs officer or a police officer if the total value moved is $10,000 or more.
Electronic funds transfer instructions must include certain information about the origin of the transferred money.
A Reporting Entity must have and comply with an “anti-money laundering and counter-terrorism financing program” (“Program”).

It is an offence for a Reporting Entity to:

Produce false or misleading information.
Produce a false or misleading document.
Forge a document for use in an applicable customer identification procedure.
Provide or receive a designated service using a false customer name or customer anonymity.
Structure a transaction to avoid a reporting obligation under the Act.

The Program is designed to identify, mitigate and manage the risk a reporting entity may reasonably face that the provision by the reporting entity of designated services at or through a permanent establishment of the entity in Australia might involve or facilitate money laundering or financing of terrorism.

Non-Compliance

AUSTRAC can take a number of steps to enforce compliance by seeking an infringement notice, a written notice to appoint an external auditor and or a civil penalty order against a Reporting Entity who do not meet their obligations.

The Federal Court of Australia sent a strong warning to other Reporting Entities in the Crown case AUSTRAC v Crown Melbourne Limited & Anor [2023] FCA 782, in which the Court ordered Crown Melbourne and Crown Perth to pay a $450 million penalty for breaching the Act.

AUSTRAC brought civil proceedings against Crown alleging the corporation failed to establish appropriate risk-based procedures and systems and measures to detect, deter and disrupt money laundering.

It found that Crown’s AML/CT Programs were not based on appropriate risk assessments and breached various sections of the Act such as international funds transfer instructions, ongoing customer due diligence, reporting obligations. Given the nature and size of Crown’s business activities, the nature of these breaches meant that high-risk activities took take place in Crown’s casinos, without proper intervention allowing millions of dollars to be transacted without being detected.

Lewis Holdway Lawyers provides advice in relation to AML/CTF to Reporting Entities to ensure compliance with the law and regulatory requirements. Contact Ita Wong ita.wong@lewisholdway.com.au if you have any questions about this topic.