Anti-money laundering and counter-terrorist …

1 April 2015 Anti-money laundering and counter-terrorist financing measuresAustraliaMutual Evaluation Report 2015 FATF and APG. All rights reproduction or translation of this publication may be made without prior written permission. Applications for such permission, for all or part of this publication, should be made to the FATF Secretariat, 2 rue Andr Pascal 75775 Paris Cedex 16, France (fax: +33 1 44 30 61 37 or e-mail: coverphoto: ThinkstockCiting reference:The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering , terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global Anti-money laundering (AML) and counter-terrorist financing (CTF) more information about the FATF, please visit the website: more information about the APG, please visit the website: document and/or any map included herein are without prejudice to the status of or soverignty over any territory, to the delimitation of international frontiers and bounderies and to the name of any territory, city or area.)

2 FATF and APG (2015), Anti-money laundering and counter-terrorist financing measures - Australia, Fourth Round Mutual Evaluation Report, FATF, Paris and APG, Sydney Anti-money laundering and counter-terrorist financing measures in Australia - 2015 FATF and APG 2015 1 ContentsEXECUTIVE SUMMARY ..5A Key findings ..5B Risk and General Situation ..7C Overall level of compliance ..7D Priority actions ..10 Table 1. Effective Implementation of Immediate Outcomes ..12 Table 2. Compliance with FATF Recommendations ..18 MUTUAL EVALUATION REPORT OF AUSTRALIA ..27 Preface ..271. ML/TF RISKS AND CONTEXT .. ML/TF Risks .. Materiality .. Structural Elements .. Other Contextual Scoping of Higher-Risk Issues ..322. NATIONAL AML/CTF POLICIES AND COORDINATION .. Background and Context .. Technical Compliance ( , , ) .. Effectiveness: Immediate Outcome 1 (Risk, Policy and Coordination) .. Recommendations on National AML/CTF Policies and Coordination ..443. LEGAL SYSTEM AND OPERATIONAL ISSUES.

3 Background and Context .. Technical Compliance ( , , ) .. Effectiveness: Immediate Outcome 6 (Financial intelligence) .. Effectiveness: Immediate Outcome 7 (ML investigation and prosecution) .. Effectiveness: Immediate Outcome 8 (Confiscation) .. Recommendations on legal system and operational TERRORIST FINANCING AND FINANCING OF PROLIFERATION .. Background and Context .. Technical Compliance ( ).. Effectiveness: Immediate Outcome 9 (TF investigation and prosecution).. Effectiveness: Immediate Outcome 10 (TF preventive measures and financial sanctions) .. Effectiveness: Immediate Outcome 11 (PF financial sanctions) .. Recommendations on Terrorist Financing and Financing of Proliferation ..795. PREVENTIVE MEASURES .. Background and Context .. Technical Compliance ( ).. Effectiveness: Immediate Outcome 4 (Preventive Measures) .. Recommendations on Preventive Measures ..912 Anti-money laundering and counter-terrorist financing measures in Australia - 2015 FATF and APG 2015 6.

4 SUPERVISION .. Background and Context .. Technical Compliance ( , , ) .. Effectiveness: Immediate Outcome 3 (Supervision) .. Recommendations on Supervision ..1037. LEGAL PERSONS AND ARRANGEMENTS .. Background and Context .. Technical Compliance ( , ).. Effectiveness: Immediate Outcome 5 (Legal Persons and Arrangements) .. Recommendations on Legal Persons and Arrangements ..1138. INTERNATIONAL COOPERATION .. Background and Context .. Technical Compliance ( ) .. Effectiveness: Immediate Outcome 2 (International Cooperation) .. Recommendations on International Cooperation ..120 TECHNICAL COMPLIANCE ANNEX ..1211. INTRODUCTION ..1212. NATIONAL AML/CTF POLICIES AND COORDINATION ..123 Recommendation 1 Assessing Risks and applying a Risk-Based Approach ..123 Recommendation 2 National Cooperation and Coordination ..127 Recommendation 33 Statistics ..1293. LEGAL SYSTEM AND OPERATIONAL ISSUES ..131 Recommendation 3 money laundering criminalisation.

5 131 Recommendation 4 Confiscation and provisional measures ..132 Operational and Law Enforcement ..133 Recommendation 29 Financial intelligence units ..133 Recommendation 30 Responsibilities of law enforcement and investigative authorities ..135 Recommendation 31 Powers of law enforcement and investigative authorities ..136 Recommendation 32 Cash Couriers ..1384. TERRORIST FINANCING AND FINANCING OF PROLIFERATION ..141 Recommendation 5 Terrorist financing offence ..141 Recommendation 6 Targeted financial sanctions related to terrorism and terrorist financing ..142 Recommendation 7 Targeted financial sanctions related to proliferation ..144 Recommendation 8 Non-profit organisations ..1455. PREVENTIVE MEASURES ..147 Recommendation 9 Financial institution secrecy laws ..150 Customer due diligence and record-keeping ..150 Recommendation 10 Customer due diligence ..150 Recommendation 11 Record-keeping ..157 Additional Measures for specific customers and activities.

6 158 Recommendation 12 Politically exposed persons ..158 Recommendation 13 Correspondent banking ..159 Recommendation 14 money or value transfer services ..160 Recommendation 15 New technologies ..161 Recommendation 16 Wire transfers ..162 Anti-money laundering and counter-terrorist financing measures in Australia - 2015 FATF and APG 2015 3 Reliance, Controls and Financial Groups ..162 Recommendation 17 Reliance on third parties ..162 Recommendation 18 Internal controls and foreign branches and subsidiaries ..163 Recommendation 19 Higher-risk countries ..165 Reporting of Suspicious Transactions ..166 Recommendation 20 Reporting of suspicious transaction ..166 Recommendation 21 Tipping-off and confidentiality ..167 Designated non-financial businesses and professions ..167 Recommendation 22 DNFBPs: Customer due diligence ..168 Recommendation 23 DNFBPs: Other measures ..1686. SUPERVISION ..169 Recommendation 26 Regulation and supervision of financial institutions.

7 169 Recommendation 27 Powers of supervisors ..171 Recommendation 28 Regulation and supervision of DNFBPs ..173 Recommendation 34 Guidance and feedback ..173 Recommendation 35 Sanctions ..1747. LEGAL PERSONS AND ARRANGEMENTS ..177 Recommendation 24 Transparency and beneficial ownership of legal persons ..177 Recommendation 25 Transparency and beneficial ownership of legal arrangements ..1808. INTERNATIONAL COOPERATION ..183 Recommendation 36 International instruments ..183 Recommendation 37 Mutual legal assistance ..183 Recommendation 38 Mutual legal assistance: freezing and confiscation ..185 Recommendation 39 Extradition ..186 Recommendation 40 Other forms of international cooperation ..188 Table of acronyms ..1934 Anti-money laundering and counter-terrorist financing measures in Australia - 2015 FATF and APG 2015 Anti-money laundering and counter-terrorist financing measures in Australia - 2015 FATF and APG 2015 5 Executive Summary1.

8 This report provides a summary of the Anti-money laundering (AML) / counter-terrorist financing (CTF) measures in place in Australia as at the date of the on-site visit (30 July 12 August 2014). It analyses the level of compliance with the FATF 40 Recommendations and the level of effectiveness of Australia s AML/CTF system, and provides recommendations on how the system could be strengthened. A. Key Findings Overall, Australian authorities have a good understanding of most of Australia s main money laundering (ML) risks but need to develop their understanding further in certain areas. They coordinate very well activities to address key aspects of the ML / terrorist financing (TF) risks but some key risks remain unaddressed, and an underlying concern remains that the authorities are addressing predicate crime rather than ML. Authorities have a good understanding of TF risks, and are addressing them accordingly. They assess that TF is largely motivated by international tensions and conflicts.

9 Operationally, national AML/CTF coordination is very comprehensive, but demonstrating its overall success is challenging, although results from national taskforces are showing positive trends. A stronger focus is required on monitoring and measuring success. Australia develops and disseminates good quality financial intelligence to a range of law enforcement bodies, customs and tax authorities. The amount of financial transaction data in the Australian Transaction Reports and Analysis Centre (AUSTRAC) database, and the fact that that all relevant competent authorities have access to this database and can use its integrated analytical tool, are strengths of Australia s AML/CTF system. However, the somewhat limited use of AUSTRAC information by law enforcement as a trigger to commence ML/TF investigations presents a weakness in the Australian AML/CTF system. Australia s main criminal justice policy objective is to disrupt and deter predicate crime, including if necessary through ML investigations/prosecutions.

10 Australia focuses on what it considers to be the main three proceeds generating predicate threats (drugs, fraud and tax evasion). However, Australia should expand its focus to ensure that a greater number of cases of ML are being identified and investigated adequately. Confiscation of criminal proceeds, instrumentalities and property of equivalent value is being pursued as a policy objective; mainly in relation to drugs, and in relation to tax by the Australian Taxation Office (ATO). Competent authorities have increased their efforts to EXECUTIVE SUMMARY6 Anti-money laundering and counter-terrorist financing measures in Australia - 2015 FATF and APG 2015confiscate proceeds of crime, particularly since the establishment of the national Criminal Assets Confiscation Taskforce. But it is unclear how successful confiscation measures are across all jurisdictions, and total recoveries remain relatively low in the context of the nature and scale of Australia s ML/TF risks and have only modestly increased over the past few years.