Australia mutual evaluation report 2015

Anti-money laundering and counter-terrorist financing measures in Australia – Mutual Evaluation Report – April 2015 1

Anti-money laundering and counter-terrorist financing (AML/CFT) measures in Australia Fourth Round Mutual Evaluation

Key findings, ratings and priority actions 20 April 2015 www.fatf-gafi.org/topics/mutualevaluations/documents/mer-australia-2015.html

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Anti-money laundering and counter-terrorist financing measures in Australia – Mutual Evaluation Report – April 2015

Key findings

Australia has a good understanding of its main money laundering (ML) and terrorist financing (TF) risks. – Australia needs to develop ML understanding further. – There is an underlying concern that authorities address

predicate crime, rather than ML. – TF is largely motivated by international tensions and

conflicts. – Australia coordinates very well activities to address ML/TF

risks but some key risks remain unaddressed. Operationally, national AML/CFT coordination is very

comprehensive, but demonstrating its overall success is challenging, despite positive results from national task forces.

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Key findings

Australia develops and disseminates good quality financial intelligence to a range of law enforcement bodies, customs and tax authorities. – All relevant authorities have access to the Australian

Transaction Reports and Analysis Centre (AUSTRAC) database and can use its integrated analytical tool. This is a strength of Australia’s AML/CFT system.

– Law enforcement makes limited use of the database to trigger ML/TF investigations, which is a weakness in Australia’s AML/CFT system.

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Key findings

Australia’s legal framework to implement target financial sanctions is a good example for other countries. – Automatic, direct legal obligation to freeze assets of new UN

designations. – Numerous designations made under the domestic regime. – Absence of freezing statistics, financial supervision, and

feedback on experience make it difficult to confirm effective implementation of the legal framework.

Australia has not implemented a targeted approach or oversight in dealing with NPOs that are risk of terrorist abuse. It has not reviewed the sector to identify the features and types of NPOs that are at risk of being misused for TF.

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Key findings

Most designated non-financial businesses and professions are not subject to AML/CFT requirements, and do not have adequate understanding of their ML/TF risks, or measures to mitigate them. – This includes real estate agents and lawyers, both identified

as high ML risk in Australia’s National Threat assessment

Major reporting entities have a good understanding of their AML/CFT risks and obligations, but some AML/CFT controls are not in line with the FATF Standards.

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Key findings

AUSTRAC supervision has a range of deficiencies. – There is no supervision or regulation of most higher-risk

designated non-financial businesses and professions because they are not subject to AML/CFT requirements.

– The authorities were unable to demonstrate that they are improving AML/CFT compliance by reporting entities or that they are successfully discouraging criminal abuse of the financial and DNFBP sectors.

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Key findings

Australia has not conducted a formal risks assessment on the TF risks of legal persons and arrangements. – Registration information concerning legal persons is largely

available to competent authorities and the public, but there is only limited verification of this information.

– Beneficial ownership information of legal persons and arrangements is not maintained and accessible to competent authorities in a timely manner.

Australia cooperates well with other countries in MLA matters, including extradition.

Informal co-operation is generally good across agencies.

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Ratings – Effectiveness (1/3)

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Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF)

Extent to which Australia has achieved this objective

1. ML and TF risks are understood and, where appropriate, actions co-ordinated domestically to combat ML and TF

Substantial

2. International co-operation delivers appropriate information, financial intelligence, and evidence, and facilitates action against criminals and their assets

High

3. Supervisors appropriately supervise, monitor and regulate financial institutions and designated non-financial businesses and professions (DNFBPs) for compliance with AML/CFT requirements commensurate with their risks.

Moderate

4. Financial institutions and DNFBPs adequately apply AML/CFT preventive measures commensurate with their risks, and report suspicious transactions.

Moderate




5. Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments

Moderate

6. Financial intelligence and all other relevant information are appropriately used by competent authorities for money laundering and terrorist financing investigations.

Substantial

7. Money laundering offences and activities are investigated and offenders are prosecuted and subject to effective, proportionate and dissuasive sanctions

Moderate

8. Proceeds and instrumentalities of crime are confiscated. Moderate





9. Terrorist financing offences and activities are investigated and persons who finance terrorism are prosecuted and subject to effective, proportionate and dissuasive sanctions.

Substantial

10. Terrorists, terrorist organisations and terrorist financiers are prevented from raising, moving and using funds, and from abusing the non-profit sector.

Moderate

11. Persons and entities involved in the proliferation of weapons of mass destruction are prevented from raising, moving and using funds, consistent with the relevant United Nations Security Council Resolutions.

Substantial


Anti-money laundering and counter-terrorist financing measures in Australia – Mutual Evaluation Report – April 2015 21-Apr-15 11

Ratings – Effectiveness

1

4 6

0

HighSubstantialModerateLow

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Ratings – technical compliance (1/5)

AML/CFT POLICIES AND COORDINATION 1. Assessing risks & applying a risk-based approach Partially compliant

2. National cooperation and coordination Largely compliant

MONEY LAUNDERING AND CONFISCATION

3. Money laundering offence Compliant

4. Confiscation and provisional measures Compliant

TERRORIST FINANCING AND FINANCING OF PROLIFERATION

5. Terrorist financing offence Largely compliant

6. Targeted financial sanctions related to terrorism & terrorist financing Compliant

7. Targeted financial sanctions related to proliferation Compliant

8.Non-profit organisations Non-compliant

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PREVENTIVE MEASURES 9. Financial institution secrecy laws Compliant

Customer due diligence and record keeping

10. Customer due diligence Partially compliant

11. Record keeping Largely compliant

Additional measures for specific customers and activities

12. Politically exposed persons Largely compliant

13. Correspondent banking Non-compliant

14. Money or value transfer services Largely compliant

15. New technologies Largely compliant

16. Wire transfers Partially compliant

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PREVENTIVE MEASURES (continued) Reliance, Controls and Financial Groups

17. Reliance on third parties Partially compliant

18. Internal controls and foreign branches and subsidiaries Partially compliant

19. Higher-risk countries Partially compliant

Reporting of suspicious transactions

20. Reporting of suspicious transactions Compliant

21. Tipping-off and confidentiality Compliant

Designated non-financial Businesses and Professions (DNFBPs)

22. DNFBPs: Customer due diligence Non-compliant

23. DNFBPs: Other measures Non-compliant

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TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS 24. Transparency and beneficial ownership of legal persons Partially compliant

25. Transparency and beneficial ownership of legal arrangements Non-compliant

POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES

Regulation and Supervision

26. Regulation and supervision of financial institutions Partially compliant

27. Powers of supervisors Partially compliant

28. Regulation and supervision of DNFBPs Non-compliant

Operational and Law Enforcement

29. Financial intelligence units Compliant

30. Responsibilities of law enforcement and investigative authorities Largely compliant

31. Powers of law enforcement and investigative authorities Largely compliant

32. Cash couriers Largely compliant

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TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS (continued)

General Requirements

33. Statistics Largely compliant

34. Guidance and feedback Largely compliant

Sanctions

35. Sanctions Partially compliant

INTERNATIONAL COOPERATION

36. International instruments Largely compliant

37. Mutual legal assistance Compliant

38. Mutual legal assistance: freezing and confiscation Compliant

39. Extradition Compliant

40. Other forms of international cooperation Compliant

Anti-money laundering and counter-terrorist financing measures in Australia – Mutual Evaluation Report – April 2015 21-Apr-15 17

Ratings – technical compliance

12

12

10

6

CompliantLargely compliantPartially compliantNon-compliant


Priority Actions for Australia to strengthen its AML/CFT System

Re-assess Australia’s money laundering (ML) risk and formalise ongoing processes to re-assessing risks. – Australia should identify metrics and processes to

monitor and measure success. More emphasis on pursuing ML investigations and

prosecutions at federal and State/Territory level. Increase efforts to address ML risks associated with

– Predicate crimes, other than drugs and tax, including foreign predicates

– Abuse of legal persons and arrangements, and the real estate sector

– Identity fraud – Cash intensive activities

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Ensure that DNFBPs are subject to AML/CFT requirements and understand their ML/TF risk – Ensure that reporting entities implement preventive

measures in line with FATF Standards, and obligations on enhanced CDD, beneficial owner and politically exposed persons.

– Improve feedback & guidance to reporting entities on reporting quality and volume.

Continue good early work to confiscate the proceeds and instrumentalities of crime, and demonstrate the effectiveness of this work over time.

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Besides data analysis from field reports, incorporate more (inherent) risk factors to identify and assess the risk of reporting entities. Consider judicious use of enforcing authority to promote further compliance by reporting entities.

Ensure that financial institutions are actively supervised for compliance with targeted financial sanction requirements. – Most likely through a legislative amendment to the statute

identifying and authorising the agency responsible for supervision (Department of Foreign Affairs and Trade)

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Australia should implement a targeted approach in relation to preventing non-profit organisations from terrorist financing (TF) abuse. – As a first step, undertake a thorough review of the TF

risks that NPOs are facing and the potential vulnerabilities of the sector to terrorist activities.

Ensure that lawyers, accountants, real estate agents, precious stones dealers, and trust and company service providers understand their ML/TF risks and are required to effectively implement AML/CFT obligations and risk mitigating measures.

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Ensure that reporting entities implement as early as possible the obligations on enhanced customer due diligence (CDD), beneficial owners, and politically exposed persons introduced on 1 June 2014.

Australia should assess the risks of TF posed by all forms of legal persons and arrangements.

Australia should also take measures to ensure that beneficial ownership information for legal persons is collected and available. Trustees should be required to hold and maintain information on the constituent elements of a trust including the settlor and beneficiary.

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Australia mutual evaluation report 2015

Government & Nonprofit

Transcript of Australia mutual evaluation report 2015