Australian Technology Innovators (“ATI Group”) are committed to preventing money laundering, terrorist financing, fraud, and other financial crimes (collectively “AML/CTF”). ATI Group is also dedicated to regulatory compliance which aims to prevent and combat money laundering and terrorism financing in accordance with the standards of the AML/CTF Act and compliance standards of the Australian Transaction Reports and Analysis Centre (“AUSTRAC”). These policies and procedures and accompanying programs are designed to meet Australian AML/CTF obligations.
Although ATI Group’s companies are not regulated entities under the relevant legislation, ATI Group takes these matters seriously and has instituted an appropriate policy.
2. Introduction to AML/CTF
Anti-Money Laundering and Counter-Terrorism Financing legislation has been enacted by numerous countries across the globe with the intention of combating money laundering and the financing of terrorism.
In Australia both AML and CTF are managed through one legislative framework. It is important to understand however, that whilst money laundering and terrorism financing both involve the movement of money, they are not the same thing.
3. Money Laundering
Money laundering involves the conversion or transfer of property, derived from a criminal offence, for the purpose of concealing or disguising its illicit origin.
Money laundering takes many forms and includes:
- Converting dirty money into clean money by moving illicit income into the legitimate financial system;
- Handling stolen goods and the proceeds from stolen goods;
- The transfer, movement or involvement with criminal property;
- Handling the benefits that flow from crimes such as theft, fraud and tax evasion;
- The investment by criminals of the proceeds of crimes in financial products and services; or
- The process of concealing the existence or illegal source of income derived from criminal activity
The factual sequence involved in the laundering of money is as follows:
- 1. A crime is committed which generates money.
- 2. A change is made to the quality of the property/money in an attempt to distance the property/money from the crime committed, changing the property/money from illegitimate to legitimate.
- 3. Money, being the proceeds of the crime, enter the financial system.
- 4. Money/property may then leave the financial system through the acquisition of an asset or it may remain on a long-term basis in the financial system, safely disguised or hidden from view through complex movements of funds across borders and banks.
The legal, compliance and regulatory risks begin from the moment dirty money enters the financial system. It is these risks that need to be managed in order to protect it from the consequences of being involved in laundering money.
4. Terrorist Financing
Terrorist financing involves the provision or collection of funds with the intention that they should be used in order to carry out or assist in the process of carrying out an act of terrorism.
Terrorist financing takes many forms and is more difficult to detect than money laundering. It is associated with:
- The provision of money to further terrorist acts;
- The provision of money to support the living expenses of terrorists; and/or
- The acquisition, movement or realisation of assets controlled by terrorists.
Internationally, law enforcement organisations freely acknowledge that they have little guidance to offer regulated entities regarding the detection of terrorist financing. As it is often difficult to pinpoint when the funds become tainted with the terrorist purpose or when they become the assets of terrorists, terrorist financing is difficult to manage using a risk-based approach as permitted by the AML/CTF legislation.
5. The Difference Between Money Laundering and Terrorism Financing
The fundamental difference between money laundering and terrorist financing is that money laundering aims to move the funds generated from criminal activity into the formal financial system and to make those funds appear legitimate. Terrorist financing aims to move funds (which may have legitimate sources) to persons associated with the criminal activity of terrorism and with little or no need for the movement to look legitimate.
- Money laundering tends to involve moving large amounts of money, whereas much of the terrorist financing that has been detected seems to involve the movement of small amounts of money.
- The source of funds to be laundered is illegal, whereas the source of funding for terrorist activities is often legal, particularly funding from charities.
- Laundered funds are usually used to buy legal assets, whereas terrorism related funds are usually used to purchase illicit goods on the black market, such as arms, or to pay the living expenses of the terrorists.
The only common factor between money laundering and terrorist financing is that in both cases the controllers of the funds want to move those funds from A to B. There are only four ways funds can move from A to B:
- 1. Through the legitimate formal financial system, which is made up of Reporting Entities under the AML/CTF Act;
- 2. Through the informal financial system. The AML/CTF Act attempts to regulate this sector through Part 6 of the AML/CTF Act which creates a register of providers of Designated Remittance Services;
- 3. Through illegal financial networks; or
- 4. By physically moving the cash, assets or negotiable instruments. The AML/CTF Act attempts to regulate the international movement of cash and negotiable instruments through Division 2 of Part 4 of the AML/CTF Act which creates a regime for reports about physical currency.
Although the AML/CTF Act and the AML/CTF Rules do not differentiate between money laundering and terrorist financing in terms of the obligations imposed on reporting entities, the differences between the two mean that the risks are different and need to be handled differently. These differences justify a reporting entity having a separate CTF stream with different risks and different indicators of those risks.
6. The Global AML/CTF Framework
In 1989 an inter-governmental body known as The Financial Action Task Force (“FATF”) was established, by what is known as the Group of 7 major industrialized countries, to develop and promote policies, both at national and international levels, to combat money laundering and terrorist financing.
Australia has been a member of FATF since 1990 and is currently one of more than 33 member states that have agreed to implement AML/CTF legislation. A list of other member organizations is published on the FATF website available at http://www.fatf-gafi.org/
Following the terrorist attacks in the U.S.A. on 11 September 2001, there was a rapid and global change in the expectations of the laws and controls that countries should have in place to counter both money laundering and terrorist financing.
As a result of this change FATF released a revised version of 40 recommendations and issued 9 special recommendations regarding terrorist financing. All members of FATF (including Australia) were expected to enact domestic laws that reflect the requirements of these revisions and new recommendations.
7. The AML/CTF Act 2006
The Anti Money-Laundering and Counter-Terrorism Financing Act 2006 covers any person or company if they are a Reporting Entity as defined in the legislation or to the extent that they provide a Designated Service described in Section 6 of the AML/CTF Act.
The AML/CTF Act became law on 12 December 2006 and forms part of a legislative package designed to implement reforms to Australia's AML/CTF regulatory regime. The reforms seek to implement Australia’s international obligations including a commitment to bring our AML/CTF regime in line with international standards.
The AML/CTF Act and rules adopt a risk-based approach to AML/CTF compliance, under which the principal obligations are set out in the legislation and more detailed requirements are laid out in the AML/CTF Rules.
In addition AUSTRAC regularly releases guidelines governing issues relating to AML/CTF implementation and enforcement. Copies of the AML/CTF Act, the AML/CTF Rules and the AUSTRAC guidelines are available at http://www.austrac.gov.au/
9. ATI Policy
Adherence to AML/CTF standards and protocol are required by ATI Group and its subsidiaries. Persons who engage in AML/CTF or who fail to comply with relevant law, regulations or ATI Group policy, will be subject to reporting protocols to relevant financial institutions and reporting bodies as AUSTRAC. ATI Group also reserves the right to terminate any business relationships that does or may breach relevant law, regulatory standards or company policy.
ATI’s AML/CTF program has been designed to integrate with other key internal compliance protocols, inclusive of:
- 2. An ATI Information retainment and recordkeeping process to assist when necessary in investigation of suspicious transactions;
- 3. Risk Awareness Training programs regarding privacy, information sharing and suspicious activity reporting.
9.2 Suspicious Transactions and Recordkeeping
ATI Group will document all identifying and verifying information provided by a customer, the methods used and results of verification, and any discrepancies identified in the verification process.
ATI Group will monitor account activity for unusual size, volume, pattern or type of transactions in consideration of risk factors and red flags that are appropriate to our business.
9.3 Risk Awareness and Compliance Training
ATI Group is committed to developing ongoing employee training under the leadership of senior management. Risk Awareness training will occur on at least an annual basis and will identify risk management protocol based on the company size, customer base, and relevant new developments in industry practice and relevant compliance law.
Risk Awareness and Compliance training will include:
- How to identify signs of unlawful or suspicious activity in the course of employees’ duties;
- How to escalate identified risks;
- The expectations of employees' in ATI’s compliance efforts;
- ATI’s record retention policy, and;
- Disciplinary consequences for non-compliance with company policy and relevant law.