Explanatory Memorandum
(Circulated by authority of the Minister for Home Affairs, the Honourable Peter Dutton MP)ATTACHMENT A: COMPARATIVE SUMMARY OF OPTIONS
The following is a summary of the options considered in this RIS:
| CUSTOMER DUE DILGIENCE (CDD) RELIANCE | |||
| OPTION 1: MAINTAIN THE STATUS QUO | OPTION 2: MINIMAL CHANGES TO THE AML/CTF REQUIREMENTS | OPTION 3: DETAILED REFORM | |
| SUMMARY | No change to the current reliance provisions. | Expand parties (domestically and internationally) that a reporting entity may rely upon when conducting CDD but liability will remain with the relying for individual breaches of CDD. | Expand parties (domestically and internationally) that a reporting entity may rely upon when conducting CDD.
Clarify that where a reporting entity relies on a third party, they remain responsible if a breach of CDD requirements occurs. Allow reporting entities to enter CDD arrangements with other regulated business, which will enable the entity to show it was reasonable for it to rely upon CDD undertaken by the third party and not be held responsible for a one off breach of CDD requirements. |
| RESOURCE IMPLICATIONS | No change to resource implications. | Minor reduction in compliance costs for regulated business. | Initial increase in compliance costs for regulated business, followed by a significant reduction in compliance costs over longer period. |
| ADVANTAGES | No advantages. | Expands the parties that a reporting entity may rely upon both domestically and internationally. | Expands the parties that a reporting entity may rely upon both domestically and internationally.
Addresses key deterrent for reporting entities to adopt CDD reliance provisions. Potential for significantly reduced compliance costs. |
| DISADVANTAGES | Provisions remain unused by reporting entities.
No reduction of compliance costs for reporting entities. |
Provisions may remain unused by reporting entities.
No reduction of compliance costs for reporting entities. |
Possibility that provisions remain unused by reporting entities. |
| CORRESPONDENT BANKING | |||
| OPTION 1: MAINTAIN THE STATUS QUO | OPTION 2: MINIMAL CHANGES TO THE AML/CTF REQUIREMENTS | OPTION 3: DETAILED REFORM | |
| SUMMARY | No change to the current correspondent banking provisions. | No change to the current correspondent banking provisions. | Provide a civil penalty provision that prohibits entering into, or continuing a correspondent banking relationship with a shell bank or bank that permits their accounts to be used by shell banks.
Require banks to conduct CDD and have appropriate approvals prior to entering into and continuing a correspondent banking relationship. |
| RESOURCE IMPLICATIONS | No resource implications. | No resource implications. | Minimal compliance costs for regulated business. Proposed reforms largely mirror current industry practice. |
| ADVANTAGES | No advantages. | No advantages. | Addresses remaining correspondent banking deficiencies identified by the FATF. |
| DISADVANTAGES | Deficiencies of corresponding banking framework as identified by the FATF mutual evaluation of Australia's AML/CTF regime remain.
Australian banks may enter/carry on correspondent banking relationships with respondent institutions that permit their accounts to be used by shell banks (carrying higher ML/TF risks). |
Deficiencies of corresponding banking framework as identified by the FATF mutual evaluation of Australia's AML/CTF regime remain.
Australian banks may enter/carry on correspondent banking relationships with respondent institutions that permit their accounts to be used by shell banks (carrying higher ML/TF risks). |
Minimal compliance costs for regulated business. |
| CDD REQUIREMENTS - SERVICE PROHIBITION WHERE IDENTIFICATION INCOMPLETE | |||
| OPTION 1: MAINTAIN THE STATUS QUO | OPTION 2: MINIMAL CHANGES TO THE AML/CTF REQUIREMENTS | OPTION 3: DETAILED REFORM | |
| SUMMARY | No changes to the customer identification regime. | No changes to the customer identification regime. | Explicitly prohibit reporting entities from providing a designated service in circumstances where the applicable customer identification procedure cannot be carried out.
Require reporting entities to make a suspicious matter report in the above circumstances. |
| RESOURCE IMPLICATIONS | No resource implications. | No resource implications. | Minimal compliance costs for regulated business. Proposed reforms largely mirror current industry practice. |
| ADVANTAGES | No advantages. | No advantages. | Address deficiency identified during the FATF mutual evaluation of Australia's AML/CTF regime. |
| DISADVANTAGES | Deficiencies of customer identification framework as identified by the FATF mutual evaluation of Australia's AML/CTF regime remain.
Risk exists where business that offers a designated service do not have capability to undertake necessary customer identification processes. |
Deficiencies of customer identification framework as identified by the FATF mutual evaluation of Australia's AML/CTF regime remain.
Risk exists where business that offers a designated service do not have capability to undertake necessary customer identification processes. |
Minimal compliance costs for regulated business. |