Changes to the Anti-Money Laundering and Counter Terrorism Financing Rules Instrument 2007 (No.1) (AML Rules) became effective on 1 June 2014. and introduced new customer due diligence requirements, together with deadlines for complying with these new rules.

1 June 2014 – new customer due diligence requirements

Key obligations under the new requirements include the need to conduct further due diligence and checks of the following:

• settlors of trust estates, in certain circumstances;
• identities of beneficial owners of companies, trusts and partnerships. The definition of beneficial owners includes persons who directly or indirectly own 25% or more of an entity or persons who exercise operational or financial control over an entity;
• politically exposed persons, particularly those who are considered to be high risk. There must be processes in place to verify the source of wealth of the politically exposed persons and for approval of their investments, at senior level;
• beneficial ownership, when assessing money laundering risk levels for different customers; and
• ongoing customers for any signs of suspicious transactions.

AUSTRAC has allowed a transition period for reporting entities to comply with the new AML Rules for the new customer due diligence requirements and will not take regulatory action if a reporting entity:

• complies with the new customer due diligence requirements for high risk customers as soon as practicable,; and
• either
o by 1 November 2014 complies fully with the new customer due diligence requirements for all new customers commencing from 1 June 2014; or
o before 1 November 2014 establishes a transition plan which identifies timelines and resources and steps required to achieve full compliance by 31 December 2015.

Transition Plan

The Transition Plan is not required to be lodged with AUSTRAC but it must be provided to AUSTRAC on request. It must be approved by the board or a similar governing body before 1 November 2014 and must include:

• how the reporting entity will comply immediately with the new customer due diligence requirements for high risk customers
• how it will achieve full compliance by 31 December 2015;
• the allocation of sufficient resources to implement the new requirements; and
• the frequency of the monitoring and reporting to the board/governing body on the progress of the implementation.

Please contact us if you need assistance with updating your AML processes or implementing a transition plan.