Exposure draft of AML legislation to be released shortly

By Narelle Smythe.

Key Points:
It is widely expected that a draft of the legislation (but not the regulations or rules)will be released in early October for comment.

The Federal Government has previously endorsed the Forty Recommendations of the Financial Action Task Force on Money-Laundering ("FATF"), the international anti-money laundering standards, and is seeking to implement those recommendations. FATF is expected to discuss an Australian Anti-Money Laundering Mutual Evaluation Report on the extent to which the current Australian anti-money laundering regime complies with those Recommendations at its first Plenary Meeting on 10-14October2005. It is widely anticipated that an exposure draft of the new Australian anti-money laundering legislation will be released for comment shortly before that meeting.

There have been a series of industry consultations with the Minister for Justice and Customs, Senator Ellison, and other government representatives over the past few months. Those discussions suggest that:

• The legislation will be principles-based legislation and will be supported by Regulations and either enforceable Rules or industry Guidelines (which will, in effect, be a safe harbour).
• The legislation will adopt a risk-based approach. Accordingly, the expectation is that the legislation will require application of risk-based assessments.
• Existing customers will not need to be identified (or re-identified) unless certain risk triggers occur.

There has been debate as to how a person's identity can be verified. At this stage, it appears that the legislation is likely to set robust standards which are technology-neutral.

Other key issues include:

• Politically Exposed Persons, including how they are to be identified and the extent to which governments and other commercial organisations will assist;
• the identification of beneficial owners and how this is to be achieved;
• the treatment of multi-partied transactions, particularly to ensure that there is no unnecessary double-handling; and
• the conduct of initial customer due diligence by agents and subagents.

As set out above, it is widely expected that a draft of the legislation will be released in early October for comment. At this stage, it is expected that only the legislation (and not the regulations or rules) will be released for comment at that time. As a result, if you have not already done so, you should give consideration to establishing a team of key personnel to review the draft, consider its impact and prepare a submission. It is expected that a period of around three months will be allowed for submissions.

For further information, please contact Narelle Smythe.