December 2006 Top Story:
***MLI ARCHIVE***
Industry waits for rules as bill passes
The AML/CTF bill has passed through parliament, but there is plenty of evidence that debate has not ended and reforms will continue.
Australia’s financial services industry has reacted favourably to the Anti-Money Laundering and Counter-Terrorism Financial Bill 2006, which passed through the Senate and became law on December 7.
The chief reaction of AML practitioners has been one of relief that more than 14 months after the Financial Action Task Force condemned the country’s anti-money laundering laws as sub-standard, the government has produced highly acclaimed risk-based legislation that the industry can work with.
PricewaterhouseCoopers forensic partner Steve Ingram said companies were often reluctant to admit such benefits, given the substantial cost of compliance and system upgrades, but the time for crime-proofing had come.
“Typically, people will roll their eyes, but it’s really time to roll up the sleeves,” Ingram told The Age.
KPMG partner Gary Gill said businesses ought to see the legislation as an opportunity to instill protective measures against broad criminal threats.
“Industry can either regard this as another compliance burden – and it is going to cost money, obviously – or they can see the potential opportunities,” Gill said.
All the same, the bill did not have a totally uninterrupted passage through parliament and a Senate committee report on the legislation gave voice to some ongoing concerns within the industry.
The report recommended longer implementation periods, as well as some tempering of the powers of the Australian Transaction Reports and Analysis Centre, whose powers will be significantly stronger now that the legislation has passed.
While the government has proposed a 24-month implementation period for the new regime, there were concerns about some obligations commencing from the date of royal assent (January 1) and the committee recommended an extra three-month implementation period.
This was effectively quashed by the government, but there is an understanding that subsequent directions might allow three months to be tacked on to the end of each staggered time period.
For instance, the areas of the bill dealing with compliance reports and correspondent banking – which by law should be in place within six months of royal assent – would need to be in place in nine months from royal assent and so on down the line for each staggered time period.
“These changes weren’t put into the final bill,” said one source. “But the government still has in mind some of these things, and they are being discussed through the parliamentary process and may be included in future directions,” he said.
Industry has also lobbied to keep consultation and review processes open after the passage of the bill.
It is worried about the prospect of the chief executive of Austrac having total authority to make rules under the legislation and recommended that Austrac be obliged to undertake consultation before making any changes to the rules.
Austrac will now have a significantly expanded role as the national AML/CTF regulator, with supervisory, monitoring and enforcement functions over a range of industry sectors. It will also be involved in educating as well as providing guidance on AML/CTF compliance for businesses.
In reference to the Senate committee’s findings, a top compliance expert told MLI that the rule-making powers of Austrac were “way too broad”.
“It gives Austrac the ability to issue rules and guidance material which will have significant material impact on the industry without the appropriate level of consultation.
“Some of the guidance notes that came out a few weeks ago were a shocker – we haven’t been very happy with consultation process of these.
“We need guidance material that works, not guidance material that impedes what we’re trying to do. When the material is wrong, it creates serious problems.”
Chris Cass, Deloitte’s forensic partner, rejected the idea that Austrac would become too powerful, saying that the new regulator needed to get on and create the rules and that further complications and delays would only cost industry more money and create chaos.
“Austrac has over a period of 18 years has sought to work with industry and to help educate and take them along the AML route, so the suggestion that overnight they will become an ogre of a regulator cannot be supported on rational argument.”
“If we get into a situation where nobody can move because everybody is waiting for somebody else to get something out, that really doesn’t help anybody. Nobody wants another Basle or Financial Services Reform Act, where delays and uncertainty greatly added to the cost.”
© DelMonte Publications Dec 2006
