The recent findings of major Australian companies not complying with the Australian Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulations has highlighted the need for due diligence in an expanding global workplace. The current AML/CTF Act 2006 applies to financial businesses such as the financial sector, gambling sector, bullion dealers and remittance service providers. However, with companies such as the Commonwealth Bank and Tabcorp coming under public fire for their AML noncompliance, the Australian Government has announced that a prospective start-date for the long-awaited/much-talked-about Tranche 2 will be issued in early 2018. Implementing Tranche 2 would extend the obligations to designated non-financial businesses who have similar vulnerabilities, including the real estate industry, high-value items dealers, lawyers, accountants and trusted services. With a speculative start date fast approaching, it’s important that businesses who may be impacted by Tranche 2 understand why they’re vulnerable, how the change will impact them and what they can do to prepare.
12 October 2017
Tranche 2 is coming – what you need to know about AML/CTF
12 October 2017
Real Estate IndustryA booming economy and absence of AML/CTF regulations has made the Australian real estate industry an attractive destination for money laundering criminals. AUSTRAC, Australia’s financial crimes regulator have stated that criminals may be drawn to the real estate industry as a channel to illicit funds due to the ability to pay for real estate in cash, the ability to disguise the beneficial ownership of property, the stability and reliability of real estate investment and the ability to increase the value of property by means of renovations. In comparison to other money laundering methods, real estate in Australia can be uncomplicated and large sums of money can be easily concealed. According to AUSTRAC, in the 2015/16 financial year, an estimated $1 billion in suspicious transactions were made by Chinese investors in the Australian property market. Other dwellings in various cities across the country have also seen a rise in the value of property by international investors, which acts as a red flag for money laundering, as criminals are generally willing to pay above market value in order to secure a safe and legitimate investment.
High-value items dealersSimilar to Real Estate, a lack of regulations surrounding high-value goods (jewellery, precious stones, antiques, fine art, yachts, luxury motor vehicles and building/bathroom/kitchen supplies) are often used by criminals for laundering money, as large sums of money can be easily disguised and enjoyed anonymously. In 2010, the Commonwealth Government recovered criminal assets including cash, houses, boats and motor vehicles amongst other items worth over $13 million.
What changes will Tranche 2 bring?The implementation of Tranche 2 for real estate professionals and high-value dealers aims to mitigate the criminal exploitation of these services. The current obligations that apply to those in the AML/CTF Act 2006 would also extend to the professionals included in the Tranche 2 changes. Such obligations would include:
- Having an understanding of the AML/CTF Act, its rules and the impact it will have on business operations.
- Enrolling your business with AUSTRAC.
- Having a process in place that enables staff to identify transactions that require submission of Threshold Transaction Reports and International Funds Transfer Instructions to AUSTRAC and any other law enforcement agency.
- Having a process in place for identifying suspicious transactions and customers.
- Enforce customer due diligence processes so that you can collect and verify customer information.