AML/CTF External Compliance Review

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) places a number of obligations on businesses in the financial sector in order to deter and prevent money laundering and terrorism financing.

One of the obligations includes adopting and maintaining an AML/CTF Program which complies with the AML/CTF Rules. The AML/ CFT Act requires that you arrange an independent audit of your AML/CFT program a minimum of every 2 years.

Reviewing your AML/CTF Program

Arranging for an independent review of your AML/CTF Program to be conducted is imperative to ensuring compliance with the AML/CTF laws. An independent review can be conducted by an internal person or an external person. In assessing the suitability of a person to conduct the independent review, a Reporting Entity may consider the following factors:

  • whether each reviewer is a member of a professional body that imposes relevant obligations on its members;
  • measures taken to avoid the risk of “self-review”;
  • whether each reviewer is sufficiently free from influence by persons involved in the development of Part A of the Reporting Entity’s AML/CTF program, or the Reporting Entity’s risk assessment, and
  • the adequacy of the reviewer’s understanding of, and expertise in applying, the obligations of the AML/CTF Act and Rules to the Reporting Entity.

For further information on how to determine whether the review is independent and what is required, please refer to AUSTRAC’s website.

What Should be Included in the Independent Review?

The review should assess and test:

  1. the effectiveness of your AML/CTF Program in addressing your ML/TF risks;
  2. if your AML/CTF Program meets the requirements of the AML/CTF laws;
  3. how effectively your AML/CTF Program has been implemented; and
  4. if you have been complying with your AML/CTF Program appropriately.

AUSTRAC may request an independent review report when a remittance or digital currency exchange business wants to renew its registration. Some banks may also require you to provide an independent review report when applying for a bank account for remittance purposes.

How Often Should you Review your AML/CTF Program?

Any business with an AML/CTF Program must have it reviewed regularly. Sophie Grace recommends that your AML/CTF Program is reviewed at least annually, however it’s up to each Reporting Entity to determine how often its program is reviewed. Some things you should take into account when making your decision include:

  • the nature of your business (i.e. Remitter, Digital Currency Exchange Provider, Financial Planner etc);
  • the size and complexity of your business; and
  • the type of ML/TF risks your business faces.

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