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Last week we released a blog describing in some detail the proposed changes to the AML/CTF Rules in relation to Customer Due Diligence (CDD), and the likely impact of these changes once registered by AUSTRAC. Call it karma, call it fate, but fast-forward a few days and the amended AML/CTF Rules have now been registered via the AML/CTF Rules Amendment Instrument 2014 (No. 3).
As noted in the supporting Explanatory Statement , the majority of the changes can be found within Schedule 2 and relate to CDD. A commencement date of 1 June 2014 has been confirmed for the Schedule 2 changes but just note that the Chapter 1 amendments relating to the definitions of ‘certified copy’, ‘certified extract’ and privacy notices (contained in Schedule 1) will commence on the day after registration of the Instrument – being the 20th of May 2014.
This may cause a bit of confusion as the AML/CTF Rules will show the Schedule 1 amendments as being in legal force, with the amendments in Schedule 2 (CDD changes) being consigned to the ‘Notes’ section until their commencement on 1 June, after which they will be incorporated into the Rules Compilation. These updated Rules can be accessed here and will be added to the AUSTRAC website shortly.
Third time lucky?
As we highlighted previously, these Rule changes have been through three lots of industry consultations. So, for the more enthusiastic AML/CTF followers, version changes have been released by AUSTRAC over the last few months to assist reporting entities to track these amendments.
For some it may be preferable to review these changes against the previous wording, particularly as Chapters 4, 5, 15 and 30 have been completely replaced. Whilst much of the previous text remains, some of the more ‘subtle’ changes may be missed without reference to the tracked versions, although the Explanatory Statement does provide a really good summary of these changes.
From the outset, it should be noted that the nature, type and volume of customers that each reporting entity deals with will determine the impact of these AML/CTF Rule changes on each business. Reporting entities with high customer volumes may need to make changes to Part A and B of their AML/CTF Programs as well as the systems and procedures that they use for identifying beneficial owners of customers (and PEPs), including customer application forms and processes.
For others, like gaming machine operators, the operational impact of the CDD changes may be small, particularly as typical customer types here will be individuals (the requirements to collect beneficial owner information from customers will typically only apply to non-individual customers).
There are also additional exceptions within Chapter 4 of the AML/CTF Rules which remove the requirement to collect and verify beneficial owner information for some customer types, as well as safe harbour provisions relating to low-medium risk beneficial owners. As such, the likely impact on each business will vary substantially.
Whilst a 1 June 2014 commencement date may raise stress levels across the country, AUSTRAC has announced a fairly lengthy assisted compliance period during which certain enforcement action will not be taken as long as reporting entities are taking ‘reasonable steps’ to implement the reforms during the period, 1 June 2014 to 31 December 2015, in accordance with the Policy Principles.
What are “reasonable steps”?
In determining whether a reporting entity has taken reasonable steps to comply with the new rules, the AUSTRAC CEO must have regard to all relevant matters, including those matters highlighted within section 4 of the Policy Principles namely;
1. If a reporting entity assesses any person who becomes a customer from 1 June 2014 as high risk then the reporting entity must comply with the relevant provisions ‘as soon as practicable’.
2. If a reporting entity is not compliant by 1 November 2014 a transition plan must be established by this date which includes actions and timeframes to achieve full compliance with the new obligations by 1 January 2016.
3. A transition plan must be approved by an organisation’s board or similar governing body, or where no board exists, by the organisation’s CEO.
4. Sufficient resources must be allocated to a transition plan to enable the 1 January 2016 deadline to be met.
5. A transition plan must be regularly monitored and reports provided to the governing body (or CEO where there is no governing body) with respect to the progress of implementation and, as necessary, appropriate action must be taken to ensure timeframes do not unreasonably deviate from those set out in the plan.
6. A copy of a transition plan together with the governing body approval and information relating to the progress of implementation must be provided to AUSTRAC on request.
The assisted compliance period ends on 31 December 2015 and all reporting entities must be fully compliant with the new CDD provisions by this date.
CompliSpace is currently updating our AML/CTF module content to ensure compliance with these new rules and shall be rolling out these updates to clients over the coming months. For further details contact the CompliSpace Team.
P: 1300 132 090
This blog is a guide to keep readers updated with the latest information. It is not intended as legal advice or as advice that should be relied on by readers. The information contained in this blog may have been updated since its posting, or it may not apply in all circumstances. If you require specific or legal advice, please contact us on 1300 132 90 and we will be happy to assist.
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