What is anti-money laundering?
Money laundering is the process of “cleaning” illegally obtained profits so that they appear legitimate. Anti-money laundering refers to the policies and legislation aimed at detecting proceeds of crime and preventing money laundering by imposing obligations on financial institutions. Failure to meet these obligations can result in civil, and in some cases, criminal penalties.
The purpose of anti-money laundering legislation is ultimately the repression and deterrence of crime through the targeting of assets.
Australia’s anti-money laundering regime
Australia’s anti-money laundering laws create a complicated regulatory compliance regime, which is primarily governed by the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act). Other important legislative instruments governing this area include:
- The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 Rules, which supplement the AML/CTF Act by providing more detailed information.
- The Financial Transaction Reports Act (FTR Act) which contains obligations for some specific business entities and professions.
- The Industry Contribution Act which regulates the annual industry contribution levy that certain reporting entities must pay to cover AUSTRAC’s operating costs.
Key obligations under the AML/CTF Act
The AML/CTF Act applies to “designated services” provided by financial institutions, bullion dealers, digital currency exchanges, the gambling industry, and remittance service providers. Entities providing a designated service under the AML/CTF Act are “reporting entities” and must:
- Enrol with AUSTRAC, Australia’s AML/CTF regulatory body.
- Conduct customer identification, verification, ongoing due diligence and transaction monitoring.
- Report suspicious matters, threshold transactions and international funds transfers.
- Conduct money laundering and terrorism financing risk assessments.
- Develop and maintain an AML/CTF program.
- Conduct AML/CTF training for employees.
- Make and retain records for seven years.
Australian Transaction Reports and Analysis Centre (AUSTRAC)
AUSTRAC is the Australian regulatory body which monitors compliance with anti-money laundering legislation. It is Australia’s financial intelligence unit, collecting transaction reports from financial entities to identify and analyse suspicious financial activity.
These reports assist AUSTRAC in identifying money laundering activities and methods. AUSTRAC then works with state and federal police in prosecuting financial crime in Australia and overseas.