Anti-money laundering and counter-terrorism financing

Overview

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.

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. This includes:

• bank credits
• traveller’s cheques
• bank cheques
• money orders
• shares
• securities
• bonds
• drafts
• letters of credit.

Australia has a strong regime to fight money laundering and terrorism financing. We are responsible for the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). The AML/CTF Act was developed in close consultation with industry stakeholders from 2004 to 2006.

The AML/CTF Act regulates financial, gambling, remittance and bullion sectors that provide designated services listed in the AML/CTF Act.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia's AML/CTF regulator and financial intelligence unit.

Modernising Australia's anti-money laundering and counter-terrorism financing regime

On 20 April 2023 the Attorney-General announced public consultation on proposed reforms to Australia's anti-money laundering and counter-terrorism financing (AML/CTF) regime.

The Australian Government is committed to protecting the integrity of the Australian financial system and improving Australia's AML/CTF regime to ensure it is fit-for-purpose, responds to the evolving threat environment, and meets international standards set by the Financial Action Task Force (FATF), the global financial crime watchdog and standard-setter.

The Australian Institute of Criminology estimates that serious and organised crime cost the Australian community up to A$60.1 billion in 2020-21, with illicit financing at the centre of most crime types.[1] It directly impacts the safety and wellbeing of Australian communities, and exploits and distorts legitimate markets and economic activity. The AML/CTF regime is a central part of Australia’s efforts to prevent criminals from enjoying the profits of their illegal activity and stopping funds from falling into the hands of terrorist organisations.

No legitimate business wants to wittingly, or unwittingly, assist the laundering of money that aids the commissioning of serious crimes including terrorism, child abuse and the illicit drug trade. The purpose of the AML/CTF regime is to assist businesses to identify these risks in the course of providing their services. In doing so, the AML/CTF regime sets out a range of measures to protect regulated entities that are at the front line in preventing serious financial crimes. These obligations build resilience against misuse by criminals within regulated sectors and require the reporting of certain transactions to government for use as financial intelligence to combat money laundering, terrorism financing and other serious financial crime. These reports are vital in understanding and stopping the flow of illicit funds into, out of and within Australia.

The AML/CTF regime represents a significant partnership between government and industry.

The Australian Government is committed to consulting with industry in the consideration of the reforms proposed in this paper. Consultation on the first consultation paper, Modernising Australia's anti-money laundering and counter-terrorism financing regime, closed on 16 June 2023. This paper was the first step in developing reforms to the Act. A second consultation paper, informed by industry submissions on this paper, will be released later in 2023. We will continue to engage with industry on the proposed reforms, including on sector-specific issues as required.

Domestic regulation

The AML/CTF Act provides the means to help deter, detect and disrupt money laundering and terrorism financing. It also provides financial intelligence to revenue and law enforcement agencies.

The AML/CTF Act implements a risk-based approach to regulation.

The AML/CTF Act sets out general principles and obligations. Details of how these obligations are to be carried out are set out in the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (AML/CTF Rules).

Businesses must meet the minimum obligations set out in the AML/CTF Act and AML/CTF Rules. Beyond that, each business must assess the risks of potential money laundering or terrorism financing when providing a designated service to a customer.

Obligations

The AML/CTF Act imposes 6 key obligations on regulated businesses:

• Conducting customer due diligence (CDD): Regulated entities must verify a customer’s identity before providing a designated service and understand the customer’s risk profile.
• Conducting ongoing due diligence: Regulated entities must conduct ongoing CDD throughout the course of the business relationship, including transaction monitoring and enhanced CDD.
• Reporting: Regulated entities must report to AUSTRAC all ‘suspicious matters’, cash transactions of A$10,000 or more, all instructions for the transfer of value sent into or out of Australia and annual compliance reports, and cross border movements of monetary instruments.
• Developing and maintaining an AML/CTF Program: Regulated entities must identify the ML/TF risks they face in providing designated services to customers and develop and maintain an AML/CTF program containing systems and controls to mitigate and manage those risks.
• Record keeping: Regulated entities must make and retain certain records that can assist with the investigation of financial crime or that are relevant to their compliance with the AML/CTF regime for 7 years, and ensure they are available to law enforcement, if required.
• Enrolment and registration with AUSTRAC: Regulated entities must enrol with AUSTRAC if they provide a designated service. In addition, remittance service providers and digital currency exchange providers must also register with AUSTRAC to permit additional checks to ensure that criminals and their associates are kept out of these sectors.

When regulated businesses provide a 'designated service' they may ask their customers to provide information about their identity. Designated services include:

• opening a bank account
• obtaining a loan
• buying shares
  or
• gambling at casinos, race tracks or gaming machines.

A business may not be able to provide the service if you cannot provide the appropriate level of identification required.

Reporting entities and Australian Government agencies who 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.

Obligations such as 'know your customer', transaction monitoring and ongoing customer due diligence are all designed to protect regulated businesses and the public by assisting regulated businesses to identify suspicious matters and report them.

Engagement

UK-Australia joint statement from the Illicit Co-ordination Dialogue

Illicit financing bolsters autocratic regimes, fuels the lifestyles of kleptocrats and corrupt elites, and facilitates terrorism and state threats. It is the lifeblood of transnational, serious and organised crime and fuels the illicit drug trade, ultimately undermining democracy and the international rules-based order.

The United Kingdom Home Office and the Australian Attorney-General’s Department formalised our joint commitment to combat illicit financing with the signing of the UK-Australia Declaration to Combat Illicit Finance in August 2022. Under this declaration, we undertook to host an annual UK-Australia Illicit Financing Co-ordination Dialogue to ensure alignment on key illicit financing policy priorities. The inaugural dialogue was held in London from 15 to 16 June 2023, and brought together senior and working level officials from our respective policy, law enforcement, intelligence, and customs agencies.

We stand with our international partners to condemn Russia’s illegal, immoral invasion of Ukraine. We reiterate our strong support for Ukraine’s sovereignty and territorial integrity, and will continue to empower Ukraine to resolve this conflict on its own terms. Russia’s war has highlighted the extent to which illicit finance emanating from high-risk jurisdictions impacts the global community.

To this end, we discussed opportunities to enhance the integrity of international financial flows through increased beneficial ownership transparency with the aim of preventing the abuse of complex corporate structures by malign actors and criminal networks to fund illicit activities. Australia and the United Kingdom shared our collective experiences and progress in improving corporate transparency and discussed how to champion robust international transparency standards and publicly accessible registers of company beneficial ownership.

Following the money and deploying effective asset confiscation measures to turn off the flow of illicit funds are among the most effective ways to disrupt and degrade criminal networks. We discussed ways to strengthen global standards in relation to asset recovery and shared best practices and experience to more effectively identify, trace, restrain and confiscate the proceeds and instruments of crime.

Australia and the United Kingdom discussed the scourge of grand corruption and how best to use tools at our disposal to hold corrupt officials to account and to restrict the enabling environment in which corruption takes place. We discussed opportunities to support global efforts to fight corruption and assist those who are harmed by corruption and noted the role of civil society in our anti-corruption efforts. These stakeholders play a crucial role in combatting corruption.

Australia and the United Kingdom have a long history of co-operation to counter illicit financing and related threats. In order to deepen this co-operation, and recognising the benefit of this dialogue, we agreed to continue the dialogue with its next iteration to be hosted by Australia in 2024 as we work to stem the global flow of illicit funds together.

Senate Inquiry into the Adequacy and Efficacy of Australia’s AML/CTF Regime

On 23 June 2021, the Senate referred the adequacy and efficacy of Australia’s AML/CTF regime to the Legal and Constitutional Affairs References Committee for inquiry and report. The committee handed down its final report in March 2022.

The committee’s final report made 4 recommendations that the government:

• accelerate industry consultation on expanding the regime to ‘tranche-two entities’
• consider the regulatory impact, technological innovation, and existing obligations
• consider the regime’s interaction with legal professional privilege
• pursue a beneficial ownership register.

No Money for Terror Ministerial Conference on Counter-Terrorism Financing

On 7–8 November 2019, Australia hosted the ‘No Money for Terror’ Ministerial Conference on Counter-Terrorism Financing in Melbourne, Australia. 

More than 65 delegations including 23 ministers, representatives from 15 international bodies including the United Nations, Financial Action Task Force (FATF) and FATF-Style Regional Bodies, as well as representatives from 28 private sector and not-for-profit organisations were involved.

The 2019 conference built on the important work of the inaugural ‘No Money for Terror’ ministerial conference in 2018, hosted by France, and its Paris Agenda. The 2019 conference assessed the evolving global and Indo-Pacific threat environment; built understanding of the key terrorism financing risks, trends and methods; and highlighted best practice from across the globe, between regions and across the public and private sector.

In their discussions, participants addressed and reinforced their commitment to the 5 key themes of the conference as outlined in the 2019 ‘No Money for Terror’ Ministerial Conference on Counter-Terrorism Financing chair’s statement

Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Associated Rules and Regulations

Home Affairs, in conjunction with AUSTRAC, undertook a statutory review of the AML/CTF Act, rules and regulations. This review was tabled in Parliament by the minister for justice on 29 April 2016. The statutory review made 84 recommendations to shape a modern AML/CTF regime that positions Australia to address current and future challenges.

Non-profit organisations

Non-profit organisations' financial operations are at risk of being misused by other individuals or organisations to finance or support terrorist activity. The consequences of becoming involved in terrorist financing are significant, and can include loss of reputation, status and donor confidence.

Non-profit organisations are traditionally cash-intensive and regularly transmit funds from supporters between jurisdictions. They often operate under less formal regulation, which exposes the sector to an elevated risk of criminal and terrorist abuse.

As a result of these risks, the Financial Action Task Force has included non-profit organisations in its recommendations to help combat money laundering and terrorism financing.

In consultation with non-profit organisations, the Australian Government has developed guidance material to:

• build awareness of the risk of being misused for the purpose of terrorism financing
• outline best practice principles which non-profit organisations can undertake to reduce this risk
• assist charities to understand and comply with legal requirements in relation to terrorism financing

The Australian Charities and Not-for-profits Commission (ACNC) has also developed a checklist to assist in protecting charities and non-profit organisations against the risk of terrorism financing. View the checklist on the ACNC website.

Individuals or organisations, including non-profit organisations, may face criminal penalties if they provide financial support to terrorists, terrorist organisations or acts of terrorism. There are 2 lists maintained by the Australian Government in relation to terrorism financing that non-profit organisations should be aware of.

We maintain a list of terrorist organisations under Division 102 of the Criminal Code Act 1995. View the list of terrorist organisations on the Australian National Security website.

The Department of Foreign Affairs and Trade maintains a consolidated list of persons and entities which are subject to a targeted financial sanction imposed by a resolution of the United Nations Security Council. Penalties apply under the Charter of the United Nations Act 1945 for making resources available to a designated individual or organisation. View the consolidated list on the Department of Foreign Affairs and Trade website.

AUSTRAC

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is Australia's anti-money laundering and counter-terrorism financing regulator and specialist financial intelligence unit.

AUSTRAC is responsible for:

• supervising compliance with the requirements of Australia's anti-money laundering regime
• collecting and analysing the financial intelligence obtained through the reporting obligations
• disseminating that intelligence for investigation to law enforcement, national security, revenue and regulatory agencies, as well as international counterparts.

Find out more on the AUSTRAC website.

Financial Action Task Force

The Financial Action Task Force (FATF) is an inter-governmental body that sets the international standards on anti-money laundering and counter-terrorism financing. Through the international standards the FATF promotes effective implementation of legal, regulatory and operational measures to combat money laundering, terrorist financing and other threats to the integrity of the international financial system.

We lead Australia’s engagement with the FATF.

Find out more on the Financial Action Task Force website.

Legislation

The below is related legislation.

• Anti-Money Laundering and Counter Terrorism Financing Act 2006
• Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 (No 1)
• Anti-Money Laundering and Counter-Terrorism Financing (Prescribed Foreign Countries) Regulation 2018

[1]Smith R & Hickman A, Estimating the costs of serious and organised crime in Australia, 2020-2021. Statistical Report no. 38, Australian Institute of Criminology, 2022, https://www.aic.gov.au/publications/sr/sr38.