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Could we finally be seeing the introduction of Tranche 2?

The past two weeks has shown some promising signs for the Australian AML/CTF in 2021.

Could we finally be seeing the introduction of Tranche 2?

For those of us in the financial crime world, we are seeing hopeful signs of the long-awaited Tranche 2 amendments before the Senate. The Australian Greens party moved a motion in the Senate to incorporate Phase 2 (aka Tranche 2) as part of the Governments earlier Tranche 1.5 Bill (see below). The Bill has passed the lower house and must now be introduced by 1st July 2021. If passed it will incorporate the legal, accountants and real estate professions expanding the reporting entity population from 1500 to over 15000. This will go a long way to addressing some of the weaknesses in the AML regime here in Australia and will finally bring us into line with international standards.

Other proposed changes include:

  • Holistic revision of AUSTRAC’s secrecy framework to facilitate enhanced information sharing & access arrangements including reforms to tipping off​
  • Introduction of voluntary suspicious matter reporting (SMR) for nonregulated entities and individuals​
  • Rationalising and expanding the application of reporting requirements related to cross border movements (of cash or bearer negotiable instruments) to include other monetary instruments​
  • Expanding the use and application of ‘reliance’ to provide regulatory efficiencies for reporting entities conducting customer due diligence
  • Completing reforms to correspondent banking requirements to align with global best practice​
  • Explicitly prohibiting reporting entities from providing a designated service if they are unable to complete customer identification procedures as part of Customer Due Diligence ​

AUSTRAC is stepping up Feedback and Guidance

We cannot help but speculate that all roads are leading to some big changes next year. In addition to increasing resources, internal restructuring has resulted in a newly created Education Capability and Communication Branch designed to increase the amount of guidance and information provided to reporting entities.

We have already started to see an increase in guidance being published by AUSTRAC and a foreshadowing of a lot more to come including:

  • specific industry-related risk assessments and indicators of financial crime
  • criminal methodologies, indicators, and case studies across different financial crime types,
  • Industry best practices and controls.

While AUSTRAC’s guidance is both educational and insightful it is designed with the specific intent of setting out Regulatory expectations. As a result, it is critical that you not only know what the guidance requires you to do but you undertake a change risk assessment and document your decisions and any changes to your existing risk profile and Program.   Recently an AUSTRAC representative noted the expectation was that entities would go through any guidance published “with a fine-tooth comb” to work out which parts apply to them, identify gaps, and uplift internal controls. It couldn’t be any clearer – could it?

AUSTRAC’s most recent guidance relates to Illegal Wildlife Trade:  New financial crime guide to combat Australian wildlife trafficking | AUSTRAC

Before you discount it as something that might not be applicable to your business consider whether your customers, your customers business or their suppliers might be involved in illegal wildlife trade and whether that directly or indirectly impacts you.

So, What now?

As an MWC Compliance Counsel member, you can rest assured that we have our antennas up for any changes – regulatory and guidance. But it is up to you to action it – whether in one of our CC workshops or reviewing your initial analysis and assessment. So, here are a few steps that we think are a must-do:

  • Analysis of the change/guidance in the context of your business (i.e. your size, nature of business, and complexity) as well as the designated services offered.
  • Assess the impact of the change, typologies, guidance, risks etc to your business and consider what, if any additional risk-based systems and controls might be needed to allow you to adequately identify, mitigate and manage your risks
  • Document your assessment and if appropriate escalate to Senior Management for review and approval. Don’t forget to make any updates to your Part A Program and procedures as needed.
  • Capture the assessment and any action taken in your AUSTRAC feedback and guidance register (yes you MUST have one and if you don’t have one now is the time to create one)
  • Conduct training for staff who are involved in AML/CTF activities and identify relevant red flags – remember awareness is key for meeting any suspicious matter reporting obligations that might arise.

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