AMLAML InvestigationMoney Laundering

Top 5 Preventive Money Laundering Practices for Australian Businesses

By June 20, 2022 No Comments
One AML Review AU - Top 5 Preventive Money Laundering Practices - image

Money laundering is a crime that puts your business and our country’s reputation and economy at risk. The Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) Act 2006 ensures that businesses take appropriate measures to guard against this and the integration of dirty or criminal money into the financial system as legitimate funds.

How do you prevent Money Laundering?

The AML/CTF Act imposes obligations designed to ensure that businesses have suitable policies, procedures, and controls in place to not only detect money laundering but also deter or prevent criminals from laundering money in the first place.

Failing to implement appropriate preventive money laundering practices puts your business at risk of non-compliance with the AML/CTF Act and negative regulatory attention.

We’ve compiled the top 5 AML practices that will help prevent money laundering (and help ensure you meet your obligations under the AML/CTF Act):

  1. Vetting and Training Staff

Vetting

Vetting involves adequately checking ‘an employee’s background to make sure they are who they say they are, checking they are suitably qualified, ensuring that the information they have provided is correct and they do not pose an ML/TF risk to your business.

Senior managers, your compliance officer, and any other employees who have AML/CTF duties should be vetted to a high standard and at a level appropriate to the risks involved with their different roles. This practice helps you avoid hiring a person who may use your business (or allow their associates to use your business) for money laundering or financing of terrorism.

Training

All employees involved in AML/CTF duties should also be appropriately trained at the start of employment and at a minimum on an annual basis. This is to ensure they understand your company’s AML/CTF policies, procedures and controls, the checks they should make when dealing with customers or transactions, what to look out for, and how to report suspicious matters.

  1. Identifying Customers and Due Diligence

Customer identification and due diligence procedures allow you to:

  • check people are who they say they are,
  • determine the risk profile of a customer or transaction,
  • identify unusual transactions and behaviour,
  • identify and manage high-risk customers or transactions, and
  • report suspicious matters when appropriate.

Applicable customer identification procedures (ACIP) include:

  • collecting and verifying customer identification information
  • identifying the beneficial owner(s) of a customer
  • identifying whether a customer or beneficial owner is a politically exposed person (PEP)
  • getting information on the purpose and intended nature of the business relationship.

You must then take reasonable steps (actions that are proportionate and suitable given the level of associated risk) to ensure you are reasonably satisfied that your customers are who they claim to be and that you are effectively managing your ML/TF risk.

For higher-risk customers or transactions, you will need to collect and verify more information—for example, source of funds/ source of wealth.

Ongoing CDD and monitoring

CDD is not just a one-off obligation. While transactions or customers may not initially appear suspicious, they may reveal a pattern of behaviour over an extended period or a sudden change in behaviour that necessitates a change to a customer’s risk profile. Ongoing CDD and monitoring should be periodically conducted throughout a business relationship to ensure the information you have about your customer and their risk profile is up to date.

  1. Keeping Transaction Records For At Least 7 Years

Keeping records that enable you to readily recreate a transaction for at least seven years after you’ve stopped providing designated services to them is an important AML practice.

Under the AML/CTF Act, the records you must keep and how long you need to retain them will depend on the type of designated services you provide and the nature of your business activities.

In addition to records of transactions, you will generally have to keep records of or about customer identification procedures and your AML/CTF program.

Keeping records helps show you are meeting your AML/CTF obligations and manage the risks of your business or organisation being exploited for money laundering. If your business or organisation is misused for money laundering, your records may help AUSTRAC and other authorities investigate.

  1. Reporting Suspicious Matter and Transactions Thresholds

Suspicious Matter Reports (SMR)

If you identify a customer or transaction that you suspect is linked to a crime, you must submit a suspicious matter report (SMR) to AUSTRAC. SMRs play a crucial role in identifying potential money laundering and assist in the detection and prevention of the flow of illegal funds through Australia’s financial system.

Example indicators of suspicious activity include:

  • complex or unusually large transactions out of step with what you’d expect from the customer
  • unusual patterns of transactions or activity that have no obvious business or legal purpose
  • any other activity that appears to be or you suspect to be related to criminal activity

Threshold Transactions Reports (TTR)

Transfers of physical currency of AUD 10,000 or more (or the foreign currency equivalent) as part of a designated service are called “Threshold Transactions”. This can be a transaction either receiving or paying cash.

Under the AML/CTF Act, threshold transfers must be reported to AUSTRAC in a TTR within 10 business days.

This helps to detect, deter, and disrupt money laundering as it makes it more difficult for criminals to use multiple small transactions, senders, or recipients to avoid detection.

  1. Scheduling Regular External Independent Reviews

It’s easy to become complacent. If everything seems to be running smoothly, why review or change what you are doing? But you may not realise you are not meeting your obligations, or there is a problem until it is too late. By contrast, you may not realise you are doing unnecessary practices that are time-consuming or costly such as enhanced CDD investigations where standard ACIP would suffice.

High-risk organisations should have an external review of their risk assessment and AML/CTF programme conducted at least every two to three years. This is the best way to protect your business from money laundering and ensure you are meeting your obligations under the AML/CTF Act.

An external auditor provides a fresh set of eyes, a wealth of experience and knowledge of the AML/CTF Act and application in your industry, and ensures you have appropriate measures in place to prevent money laundering. Their detailed recommendations can increase efficiencies within your business and minimise the risk of money laundering and/or negative regulatory attention.

How can One AML Review help you prevent money laundering?

One AML Review are independent and fully qualified AML/CTF review specialists. We work with you to provide actionable insights to help your business prevent ML/TF and stay on top of AML/CTF requirements.

Book a free 15-minute consultation to see how we can help you implement AML practices here.