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Navigating AML/CTF Programs – Essentials for AFSL and Credit Licence Holders

The AML/CTF Act imposes obligations on financial service and credit providers that provide designated services (listed in section 6 of the AML/CTF Act) and are geographically linked to Australia (Reporting Entities). These Reporting Entities are required to establish a written AML/CTF Program that addresses potential risks related to money laundering (ML) and terrorism financing (TF).

All Reporting Entities must implement one of three types of AML/CTF Programs:

  1. Standard AML/CTF Program; 
  2. Joint AML/CTF Program; or 
  3. Special AML/CTF Program. 

Standard AML/CTF Programs are required to be implemented for individual Reporting Entities and consist of two parts:

  1. Part A – the main purpose of Part A is to identify, mitigate and manage risks associated with ML and TF. Other elements which are required to be included in Part A are specified in Chapter 8 of the AML/CTF Rules.
  2. Part B – sets out customer identification and verification procedures in accordance with Chapter 4 of the AML/CTF Rules.

Joint AML/CTF Programs are for Designated Business Groups (DBGs) comprising multiple Reporting Entities. A Joint AML/CTF Program is required to have a Part A and Part B just like the Standard AML/CTF Program.

Special AML/CTF Programs are designed for Reporting Entities who only provide designated services outlined in item 54 of table 1 in s 6 of the AML/CTF Act. Item 54 providers are AFSL holders who arrange for a person to receive a designated service. For instance, if you do not issue financial products, but arrange for your clients to acquire a financial product from another Reporting Entity, you will be an item 54 provider. This category commonly includes financial advisers who arrange for their clients to receive designated services via another Reporting Entity. The purpose of a special AML/CTF Program is to set out customer identification and verification procedures. 

Exemptions for item 54 service providers:

An item 54 provider is not required to comply with the following requirements:

  • having a standard AML/CTF Program which includes Part A or have in place appropriate management oversight procedures. However, AUSTRAC considers that it is good practice for item 54 providers to have in place an oversight structure which is based on the nature, size and complexity of your business;
  • lodging an Annual Compliance Report with AUSTRAC;
  • conducting an independent review of your AML/CTF Program on a regular basis; and
  • conducting ongoing customer due diligence. 

Important Points

If you are an item 54 provider and also providing another designated service (that is in addition to arranging for a person to receive a designated service from another Reporting Entity), you will not be able to rely on exemptions for item 54 providers.

Further Reading

Further Resources

AML/CTF Program

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Sophie Grace has extensive knowledge and is ready to guide you through the complex regulatory requirements, while assisting you in crafting the right AML/CTF Program tailored to your operations. If you would like to discuss your obligations as a Reporting Entity, please contact us

 

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