AML Legislation Updates – an analysis

Image: Unsplash/Jean Beller

3 March 2021

Recently, two legislative amendments by the Federal Parliament have moved Australia incrementally forward in the fight against money laundering.

The first are changes made to the anti-money laundering legislation

On 10 December 2020, the Parliament passed the Anti-Money Laundering and Counter-Terrorism Financing and Other Legislation Amendment Act 2020 (the Amendment Act) to implement the next phase of reforms arising from the recommendations of the Report on the Statutory Review of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and Associated Rules and Regulations.

The main changes as described in the Explanatory Memorandum are:

  • prohibiting financial institutions from entering into a correspondent banking relationship with another financial institution that permits its accounts to be used by a shell bank. The amendments require banks to conduct due diligence assessments before entering into, and for the duration of, any correspondent banking relationship;
  • clarifying the requirement to complete the applicable customer identification procedure (ACIP) before providing a designated service; and
  • expanding the circumstances in which a reporting entity may rely on an ACIP or other identification procedure undertaken by another person. This includes permitting reporting entities to enter into an agreement or arrangement for reliance on another person and having ACIP or other identification procedures undertaken by another reporting entity, a person in another country, or a person within their corporate or designated business group;
  • expanding the exceptions to the prohibition on tipping off to permit reporting entities to share suspicious matter reports (SMRs) and related information with external auditors, and foreign members of corporate and designated business groups;
  • providing a simplified and flexible framework for the use and disclosure of financial intelligence;
  • creating a single reporting requirement for the cross-border movement of monetary instruments;
  • addressing barriers to the successful prosecution of money laundering offences.

AUSTRAC has published draft Rules for comment that implement some of the changes made by the Amendment Act.

Whilst these changes are welcome as facilitating compliance by business with the AML/CT regime and assisting regulatory and law enforcement agencies to better use the regime, they fall far short of the changes to the scope of the legislation that are required to comply with international requirements and prevent Australia from becoming the receptacle for dirty money from around the world.

Australia’s AML/CTF regime still does not cover facilitators such as real estate agents, lawyers and accountants despite mounting evidence of their use for money laundering.  The recent amendments, referred to as Tranche 1.5, are some of the non-controversial and easy amendments that arise out of the 2015 statutory review, even though it still took Government nearly six years to legislate them.

The second legislative amendment picks up on the topic of prosecuting money laundering

The Crimes Legislation Amendment (Economic Disruption) Act 2021 (Economic Disruption Act) seeks to tackle the complex legal and administrative arrangements, strict information compartmentalisation, encrypted communication services, and other methodologies employed by criminals to frustrate law enforcement’s efforts to identify predicate offending (and therefore show that money or property is the proceeds of crime).

The amendments extend money laundering offences to persons who cause a dealing with money or other property to occur, or engage in conduct in relation to money or other property. This ensures that offences capture the ‘controllers’ of these networks who do not typically deal with money or other property directly and instead send instructions to another person to locate, move or otherwise engage in conduct that affects money or other property.

The Economic Disruption Act also targets members of these networks who remain wilfully blind to the nature and origins of proceeds of crime that they deal with as a means of avoiding money laundering offences.

The Economic Disruption Act also creates new offences to plug holes in the current legislation relating to money or property valued at $10 million or more.  It also introduces a new offence of dealing with money or other property valued at $1 million or more where it is reasonable to suspect that the money or other property was ‘proceeds of indictable crime’.

Whilst these legislative amendments strengthen the criminal sanctions in respect to money laundering, historically, law enforcement has been reluctant to prosecute money laundering offences.  Law enforcement has instead prosecuted the predicate offences hoping that this will cause sufficient disruption to the criminal enterprise to stop the illicit money from being generated.  This has incurred criticism from the international regulator as an effective anti-money laundering regime also needs to target the proceeds of crime that have already been generated.  Whether these legislative amendments will be used to cure this deficiency remains to be seen.

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report: doors wide open

The real estate market has long provided a way for individuals to secretly launder or invest stolen money and other illicitly gained funds. Not only do expensive apartments in New York, London or Paris raise the social status of their owners and enhance their luxurious lifestyles, but they are also an easy and convenient place to hide hundreds of millions of dollars from criminal investigators, tax authorities or others tracking criminal behaviour and the proceeds of crime.

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