Chartered Accountants Australia and New Zealand, CPA Australia and the Institute of Public Accountants support the inclusion of some of the services provided by tranche-two entities and the proposed reforms to modernise the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (the Act).

Capturing some of the services offered by tranche-two entities in the AML/CTF regime will strengthen the detection and prevention of money laundering and terrorism financing in Australia. Inclusion in the AML/CTF regime will be most effective and efficient where the government considers the extensive regulatory and professional obligations to which members of the Professional Accounting Bodies are already subject.

AML/CTF programs

We support the modernization of the regime bringing the current two-part program into a single program. We also seek for the language of the regime to recognise that the majority of tranche two entities that will be offering services captured under the Act will be micro, small and medium-sized businesses. Therefore, guidelines on how to meet obligations should reflect the resources and business language of tranche two entities.

We use the example of parties that can approve a program, currently, a ‘governing board’ or a ‘senior management’ team. Many of the tranche two entities will not have the need for such bodies. Sector-specific guides should provide clarity on such obligations, for example, the director or owner of the small business.

We also seek clarity on how a reporting entity can capture that they undertake customer due diligence (CDD) in their AML/CTF program. The Act requires reporting entities to sight documents to verify a customer’s identity while the Rules require entities to collect sensitive identity data. From members already in the regime, we understand many chose to keep copies of verification documents as proof of undertaking CDD to satisfy a person undertaking an independent review of their program. 
We raise the concern that keeping copies of such documents increases the risk of a cyber-attack on a reporting entity. Prescriptive guidelines on how to record identity verification documents and that copies are not required to be retained will provide clarity for reporting entities and the person they engage to undertake an independent review.

Guidance from the regulator

We consider it essential that detailed, sector-specific, guidance be developed on how to undertake a risk assessment and develop an AML/CTF program.  Further, such guidance be available prior to the enactment of tranche two to enable those entities to commence their risk assessment, develop a program and embed additional processes if needed to meet obligations.

We also seek templates to support small businesses to meet these obligations which should outline mandatory elements and still require entity-specific risks to be considered.  The templates for small practices providing accounting services should include the choice to meet obligations by reference to existing statutory and professional standards obligations for those that are members of one of the professional bodies.

We also seek support from the government to raise public awareness on the inclusion of tranche two entities so that, on seeking a service captured in the regime, a customer will expect to verify their identity, source of funds and source of wealth.

Customer due diligence

We consider that part of the modernisation of the Act should seek to streamline customer due diligence (CDD) into a single area.  Currently, many of the reporting entities undertake enhanced CDD to mitigate the risk of non-compliance. Yet, where there is low risk, this is a misuse of resources that is unaffordable for tranche-two entities.

We propose a single area in the Act for CDD that outlines the minimum and then progresses through additional CDD steps depending on specific trigger events. For example, undertake the minimum, if this reveals the customer is a politically exposed person, undertake additional CDD.

What services should be captured?

For accounting services, this will rely on the regulator completing a sector-specific risk assessment that considers the risk of each accounting service offered under the broad categories identified in the international standard. Based on the learnings from our members’ experience in New Zealand we sought clarification if a range of services were to be designated in the Australian regime.

We requested further consultation to be undertaken which specifically worked through the breadth of accounting services offered to identify those that had an inherent risk of misuse by criminals.

Are there any existing practices that would duplicate the six key AML/CTF obligations?

While we highlighted key areas of duplication, particularly on CDD obligations, we mapped the full suite of our members’ existing obligations against the obligations of the AML/CTF regime in Attachment C.

AUSTRAC funding model

We did not support AUSTRAC being moved to a full cost recovery agency. We consider that the benefits to be gained by a robust AML/CTF regime benefitted all Australians and the reputation of the nation as a whole as a modern, fair and transparent place to do business.

Closing comments

Capturing tranche-two entities in the AML/CTF regime will strengthen the detection and prevention of money laundering and terrorism financing in Australia. For accounting services, the AML/CTF regime will be most effective and efficient where the government considers the extensive regulatory and professional obligations to which members of the Professional Accounting Bodies are already subject.