Frequently asked questions
Questions and answers
Some questions answered about the AML/CTF Act
What is money laundering?
What is terrorism financing?
Why has new legislation been introduced?
How will the enhanced AML/CTF framework prevent, detect and deter money laundering and terrorism financing?
When will obligations under the new legislation come into effect?
When will customers be affected by the new AML/CTF laws?
What impact will there be on customers?
Which customers will be affected by the new AML/CTF laws?
Will customers need to provide more information?
Can a Tax File Number be used to verify my identity?
As an existing customer of a bank, will I need to identify myself again if I access another service at the same bank?
Will I need to be identified at a casino?
What happens if I do not have identification?
How will privacy be protected?
Why are the changes being implemented in phases?
How has the Government minimised implementation costs?
What are the new reporting obligations?
What is AUSTRAC?
How is this different to existing identification and verification obligations under the Financial Transactions Reports Act 1988 (FTR Act)?
Have all affected sectors been consulted about the reforms?
Is the Government going to assist industry and the general public in understanding the impacts of the new system?
What is money laundering?
The goal of most criminal acts is to generate a profit. To enjoy their ill-gotten gains, criminals commonly seek to disguise the illegal source of those profits. Money laundering is the processing of criminal profits to disguise their illegal origin.
What is terrorism financing?
The term terrorism financing includes the financing of terrorist acts, and of terrorists and terrorist organisations. The financing of terrorism may include the provision of any kind of asset in any form, including but not limited to, bank credits, travellers cheques, bank cheques, money orders, shares, securities, bonds, drafts, and letters of credit.
Why has new legislation been introduced?
Australia has implemented new laws to improve Australia’s existing anti-money laundering and counter-terrorism financing system. These new laws meet higher international standards to protect Australian businesses from being used for money laundering and terrorism financing. The new laws will make it harder for criminals to use the profits of crime and terrorists to receive money to carry out terrorist acts.
How will the enhanced AML/CTF framework prevent, detect and deter money laundering and terrorism financing?
The reforms to Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) legislation will provide law enforcement agencies with high quality financial intelligence, to assist in the detection and prevention of terrorist activity and the laundering of proceeds of crime.
The new legislation will provide better quality and larger volumes of financial transaction reports to the regulator, the Australian Transaction Reports and Analysis Centre (AUSTRAC), allowing AUSTRAC increased opportunities to detect instances where legitimate financial, gambling and bullion activities are being used for money laundering and terrorism financing.
When will obligations under the new legislation come into effect?
The new obligations will be phased in over two years from 12 December 2006, providing business with sufficient time to implement the measures.
In an additional effort to assist business during each implementation phase there will be a 15 month period following commencement of each phase when the regulatory authority, the Australian Transaction Reports and Analysis Centre (AUSTRAC) will not seek a civil penalty against a reporting entity if the reporting entity has taken reasonable steps to comply with its obligations.
When will customers be affected by the new AML/CTF laws?
Customers will not be affected by the new laws until 12 December 2007.
What impact will there be on customers?
The impact of the AML/CTF Act on customers will depend on what level of money-laundering and counter terrorism risk the reporting entity has attributed to the ‘designated service’ they are providing to that customer.
New customers will have to be identified before they can receive a designated service. In many cases this will be done internally by the reporting entity and the customer will not be affected. In some cases a customer will have to provide minimum verification information which may involve as little as producing a drivers licence.
Existing customers will not be required to be identified but will be subject to risk based ongoing due diligence. Existing customers might need to have their identity verified where the reporting entity has conducted a risk based assessment of their situation. .
Which customers will be affected by the new AML/CTF laws?
The new laws will affect customers receiving designated financial, gambling and bullion services. Designated services include, but are not limited to, opening an account, obtaining a loan, buying shares or gambling at casinos, race tracks or gaming machines.
Lawyers and accountants providing their usual legal and accounting services, jewellers selling jewellery, or real estate agents selling land and property, are not affected by the new laws except if they provide a designated service under the legislation.
Will customers need to provide more information?
A customer conducting a transaction in circumstances determined to be a low risk will generally only have to provide minimum verification information which may involve as little as producing a drivers licence. The new identification regime imposed on customers may be less of a burden than the current 100 point test required by regulations under the Financial Transactions reports Act 1988. This will depend on the result of the risk assessment conducted by the reporting entity. The identification obligations do not come into force until 12 December 2007.
Can a Tax File Number be used to verify my identity?
No. A Tax File Number (TFN) cannot be used or disclosed to establish or confirm your identity.
As an existing customer of a bank, will I need to identify myself again if I access another service at the same bank?
The new laws do not require existing customers to be re-identified except where the reporting entity determines the transaction involves an increased risk. For example, an existing bank customer may have conducted only similar low-level transactions over a period of time. The customer then requests the same institution to sell them a significant amount of shares in a company. The cost of the shares is demonstrably inconsistent with the customer’s existing profile. This would require the financial institution to take action, possibly including further verification of the customer’s identity.
Will I need to be identified at a casino?
As a customer of a casino you will need to be identified when you:
- redeem gaming chips of an amount of $10,000 or more;
- receive winnings in cash of $10,000 or more;
- are paid out winnings of $10,000 or more for a game played on a gaming machine;
- open an account with the casino.
What happens if I do not have identification?
A business may not be able to provide the service you require if you are unable to provide the appropriate level of identification required by the business.
How will privacy be protected?
Reporting entities and Australian Government agencies which collect personal data are subject to the Privacy Act 1988 (Privacy Act). The Privacy Act covers the collection, use, disclosure, quality and security of personal information.
The AML/CTF reform package amends the Privacy Act so that any small businesses that have been exempt from the Privacy Act, but which are affected by the new AML/CTF legislation, are subject to the Privacy Act in regard to their obligations under the AML/CTF Act.
The AML/CTF Act regulates access to information received by AUSTRAC. The AUSTRAC CEO may authorise specified officials or classes of officials of a specified designated agency of a designated agency to have access to AUSTRAC information for the purposes of performing the agency’s functions and powers. Non-designated agencies may also access AUSTRAC information in very limited situations. This is regulated by the AML/CTF Act and is also subject to the discretion of the ASUTRAC CEO.
The AML/CTF Act regulates the use of AUSTRAC information once accessed. The AML/CTF Act makes it an offence for the officers of AUSTRAC and designated and non-designated agencies to improperly disclose information obtained under the Act.
Why are the changes being implemented in phases?
The new Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) came into force on 12 December 2006. Many of the new obligations will be phased in over two years, providing business with sufficient time to implement the measures.
In an additional effort to assist business during each implementation phase there will be a 15 month period following commencement of each phase when the regulatory authority, the Australian Transaction Reports and Analysis Centre (AUSTRAC) will not seek a civil penalty against a reporting entity if the reporting entity has taken reasonable steps to comply with its obligations.
How has the Government minimised implementation costs?
The Government recognises that affected businesses will incur costs in implementing the reforms. The Government has done what it can to minimise the costs of implementation through:
- phasing-in the new obligations over a two-year period, with a 15-month period following the commencement of each phase, during which time AUSTRAC will not seek a civil penalty against a reporting entity if the reporting entity has taken reasonable steps to comply with its obligations.
- adopting a risk based, business-specific approach which will allow industry to apply its resources to the customers and areas of its operations at greatest risk
- permitting flexibility in the legislative requirements so that AML/CTF programs and customer identification regimes need only be appropriate to the size and complexity of the business.
Obligations under the proposed AML/CTF regime were designed in a way that they can build on systems and procedures that are already carried out by reporting entities under existing legislation and good governance practices.
What are the new reporting obligations?
The AML/CTF Act imposes obligations on new reporting entities including identification, verification and ongoing monitoring of customers; reporting suspicious matters and transactions above a set threshold; ensuring customer information accompanies international funds transfer instructions; and record keeping obligations.
The keystone of the regime is a requirement for a reporting entity to know its customer.
How is this different to existing identification and verification obligations under the Financial Transactions Reports Act 1988 (FTR Act)?
Under the FTR Act customers opening certain accounts with “cash dealers” are required to provide identification under either the 100 point test, using documents such as a passport, drivers licence and utilities notice or have their identify confirmed by an “acceptable referee”. Under the new legislation businesses will determine the appropriate level of required identification and verification subject to the money laundering and terrorism financing risk. The identification obligations are extended to a wider number of services than currently covered by the FTR Act.
Under the new legislation, reporting entities also have to monitor customer transactions during their provision of the designated service. Reporting entities must monitor customer transactions with a view to identifying, mitigating and managing the risk that the provision of the designated service may involve or facilitate money laundering or terrorism financing.
What is AUSTRAC?
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia’s AML/CTF regulator and financial intelligence unit.
AUSTRAC currently oversees compliance with the reporting requirements of the Financial Transaction Reports Act 1988 by certain financial service providers, the gambling industry and others.
AUSTRAC’s role is extended to regulate businesses who provide designated services covered under the new Act.
Have all affected sectors been consulted about the reforms?
Affected sectors have been involved in extensive consultation throughout the development of the AML/CTF legislation. The final form of the legislation was shaped by two reports from the Senate Standing Commitee on Legal and Constitutional Affairs and over 200 submissions received from affected sectors and the public during two public consultation periods. Key industry bodies also participated in a Ministerial Advisory Group which provided the Government with high level policy advice. Industry bodies were also represented on a range of working groups including a focus group formed to develop the operational AML/CTF Rules.
Is the Government going to assist industry and the general public in understanding the impact of the new system?
The Australian Government has announced a $12.7 million public awareness campaign to inform the community about why Australia has introduced new AML/CTF laws and what the Government will do to support business and the community in the period in which the new laws are being implemented.
Government officials are working closely with key stakeholders to develop this public awareness campaign.
The campaign will be informed by market research and in consultation with industry.
AUSTRAC, as the regulator with responsibility for monitoring business compliance with AML/CTF obligations, is also developing an education and training strategy for affected businesses to help them understand their new obligations and to meet industry and other government agency requirements.