- The Anti-Money Laundering and Counter Terrorism Financing (AML/CTF) regime seeks to help instill public confidence in our financial systems, both here and overseas
- Australia and New Zealand are members of the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering (APG)
- Australia and New Zealand have different requirements under the regime because of different legislation
Money laundering is a process where ‘dirty money’ received from criminal activities, such as misuse of drugs, theft and tax evasion, is passed through legitimate businesses and turned into ‘clean money’. It is a significant problem, both here and worldwide.
Anti-money laundering and counter-terrorism financing legislation is being implemented in New Zealand and Australia in two phases. Phase 1 has been in effect for a number of years and applies to banks, casinos and a range of financial service providers. When Phase 1 commenced, the intention to extend the legislation to cover accountants and other designated non-financial businesses and professions (DNFBPs) was signalled. Many accountants have initially been exempt from Phase 1 of the regime.
Work on Phase 2 is now underway in both Australia and New Zealand to bring the accounting profession into the regime. This will enable us to meet our obligations as members of the Financial Action Task Force by bringing us into line with international best practice.
After going through the Parliamentary process, the legislation that gives effect to Phase 2 of the regime has received the Royal assent. Accountants in practice will need to be ready to comply from 1 October 2018. We have prepared a high-level summary of the requirements which can be found in the related downloads section below.
The supervisor of all Phase 2 reporting entities is the Department of Internal Affairs (DIA). It has released a Phase 2 Sector Risk Assessment (SRA) which assesses the risk of money laundering and terrorism financing occurring within the accounting profession as medium-high. This is consistent with international experience and expectations. DIA has produced a wealth of resources to assist with compliance, including a Guideline for accountants which provides the DIA’s interpretation of the AML/CFT Act in the context of the accounting profession, and translates ‘captured activities’ into accounting services to help you work out if your business is an AML ‘reporting entity’. A summary of all the regulations and guidance that is available can be found in the related downloads section below.
In addition, we have developed an FAQ document addressing questions raised about the AML/CFT Act. This is also in the related downloads section below.
Guidance for accountants
Complying with the AML/CFT Act 2009Read now
Australia is currently tracking about a year behind New Zealand. The Attorney-General's Department (AGD) released a consultation paper on regulatory models for accountants for which submissions were due at the end of January 2017. This model was then used to inform a cost benefit analysis that was conducted in April 2017.
The cost benefit analysis was finalised in June 2017 and is currently with the Minister for Justice for consideration. The project plan indicated the next consultation would be in the second half of 2017. So the timing indicated on the website is no longer current, and at this stage there is no revised project plan. The tranche 2 reform is a large project, and will be progressed over the next 2 years.
Visit the Australian Department of Home Affairs project page to find out moreRead more
The coverage of the regime is activity based - it captures entities who carry on one or more of a set of prescribed activities. Generally, these activities involve dealing with client assets on their behalf. This might involve actually conducting transactions on their behalf, or giving instructions to a third party to conduct the transactions. Either way, the business will be a 'reporting entity' for AML purposes and subject to full compliance requirements.
New Zealand – application to accountants in Phase 2
A reporting entity is an accounting practice that, in the ordinary course of business, carries out one or more of the activities described in the definition of “designated non-financial business or profession”in section 5(1) of the Act.
- Appoint a Compliance Officer to administer and maintain the AML/CFT programme
- Produce a written risk assessment that addresses the risks the reporting entity may reasonably expect to face
- Establish a written AML/CFT programme based on the risk assessment containing internal procedures, policies and controls to address AML/CFT risk
- Perform customer due diligence (CDD) including verifying customer identity
- Report suspicious activities to the New Zealand Police’s Financial Intelligence Unit
- Report prescribed transactions (domestic cash transactions of $10,000 or more and international wire transfers of $1,000 or more) to the New Zealand Police’s Financial Intelligence Unit
- Submit an annual report to the supervisor
- Obtain an assurance engagement over the risk assessment and AML/CFT programme every two years.
New Zealand follows a multi-agency supervision model.
- The Reserve Bank (RBNZ) - banks, life insurers, and non-bank deposit takers
- The Financial Markets Authority (FMA) - securities, trustee corporations, futures dealers, collective investment schemes, brokers and financial advisers
- 'The Department of Internal Affairs (DIA) - all Phase 2 reporting entities (accountants, lawyers, real estate agents, conveyancers, high-value dealers and the NZ Racing Board), casinos, money changers, trust and company service providers, and other reporting entities not covered by the RBNZ or the FMA.
A reporting entity that commits an offence under the Act is liable, if convicted to a fine of up to $5 million.
An individual who commits an offence under the Act is liable, if convicted, to up to two years imprisonment and a fine of up to $300,000.
Australia – application to tranche 1 reporting entities
A reporting entity is a business which provides designated services. The definition of a designated service is outlined in Tables 1 to 3 in Section 6 of the Act. Phase 1 of the regime is aimed at financial institutions. Accounting services aren’t generally considered a designated services.
- A new customer must be identified before providing a designated service.
- An AML/CTF program must be implemented
which identifies, mitigates and manages the money laundering and/or terrorism
financing risks. This usually includes:
- An assessment of the risks associated with the services being provided, taking account of the customers and their jurisdictions
- An AML/CTF risk awareness training program
- An employee due diligence program
- Documentation of the AML/CTF program and approval by the CEO or Board
- A nominated AML/CTF Compliance Officer
- Regular independent reviews of the AML/CTF program by an independent external or internal party
- Appropriate customer identification procedures.
- An annual Compliance Report must be submitted to the supervisor
- Any suspicious matters must be reported to the supervisor.
Australia has a single national regulator; the Australian Transaction Reports and Analysis Centre (AUSTRAC) who also performs the Police body role with suspicious matter reports.
Failure to comply under the Act carry civil penalties of up to $4.2 million for an individual and $21 million for a reporting entity.