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Anti Money Laundering

High integrity equals low risk.

The Anti-Money Laundering and Counter Terrorism Financing Act 2006 (AML/CTF Act) is due for implementation in two tranches beginning in December 2007. Refer to www.austrac.gov.au for more details. Money laundering defines the way some criminals use the legitimate financial system to try to hide or disguise the proceeds of crimes.

Are you involved?

If you operate in the following areas of work:

These industry sectors become 'reporting entities' under the legislation only when they provide 'designated services'. Such services include opening an account; accepting deposits; making a loan; issuing, acquiring or disposing of a bill of exchange, a promissory note or a letter of credit; issuing a debit or stored value card; issuing traveller's cheques; providing mortgages and reverse mortgages, and sending and receiving electronic funds transfer instructions.

For the gambling sector, designated services include receiving or accepting a bet; placing or making a bet; allowing a person to play a game on an electronic gaming machine; paying out betting winnings; and exchanging money for gaming chips or tokens, then you are involved.

Will you need to do more work?

These laws will place significant due diligence obligations upon the staff of Financial Services organisations and on Customer identification in an external transactional sense, however the risk-based approach recognises that financial companies have the most experience and knowledge of how to assess and implement measures to reduce the risk of money laundering and terrorism financing.

So the implementation is non-prescriptive and individuals/organisations must make decisions based on their experiences and modify them as time goes by to best suit their environment and changing customer base.

Customer Identification

In terms of Customer identification at the point of a transaction, apart from the Austrac guidance, The Investment and Financial Services Association Limited (IFSA), in conjunction with The Financial Planning Association of Australia (FPA), have developed guidelines which tend to follow the standard 100 point I.D. check concepts with additions as required. Refer to http://www.ifsa.com.au/public/content/ViewCategory.aspx?id=619#G21 for details of these guidelines. The level of checking is proportional to the risk involved and methodologies of how to perform the check are also included.

Employment Screening

The internal focus then turns onto your staff and their true values, plus their image/ appearance in representing your organisation and its brand and reputation.

The PRM Group is an experienced service provider in the area of Pre Employment Screening (PES) including Security Checks and Risk Management. In fact, we are the longest established organisation in Australia dedicated to pre employment screening. Personnel Risk Management (Australia) was registered with ASIC in 1997 and later changed its name to The Personnel Risk Management Group. We have been working in Australia, New Zealand and many other countries since the inception of the company. We have now established major links with companies who perform similar roles in the UK, the USA and almost all continents of the world.

In line with Austrac's Guidance Note – Risk management and AML/CTF Programs Sept 2007, which refers to the Australian Standard AS4811:2006 and the ASIC Handbook for Reference Checking in the Financial Services Industry HB322-2007, we have added our knowledge and experience and have developed an amended package of screening checks which can be used to validate the AML/CTF legislation. We commenced with the APRA Fit & Proper Person Guidelines, (SGN110.1) which are historically the standard within the critical Financial Services Industry, and then developed the specific AML/CTF Package from this base:

This package contains evidence of a person's identity and right to work in Australia, their technical capabilities, work history, work ethics, personal values, financial position and criminal history. All in all it covers all personal and technical elements which collectively represent a person's integrity.

Integrity is then used as the indicator of Risk to the organisation. High integrity equals low risk. The above package is ideal and is set to become the standard for AML/CTF compliance for any senior/responsible staff members.

In practical terms, a reduced level of checking may well be reasonable at the low risk end of the job specifications. If a staff member is not directly handling client's monies etc then maybe you could reduce the package to:

This removes some of the management related elements which may not be appropriate to the role, without detracting from the personal values evaluation.

The independent nature of screening checks is mandatory when dealing with subjects the like of Crime/Money-Laundering/Terrorism. You cannot afford any questions to be raised about the integrity of your organisation or your staff. And you certainly cannot afford to miss a “bad guy” and have something concrete actually happen. Arguing that “you” did everything possible doesn't justify missing some important fact, when clearly you are not the expert in the field.

Real work

Now, is this more work than you previously performed? Hopefully not. Your organisation should by now have Policies & Procedures in place that incorporate sensible Pre Employment Screening (PES) checks. We know that a good reference check is the single largest advantage to reducing the risk of new employment. And adding a few more checks makes you compliant with APRA/ ASIC type guidelines, so you should be doing most of this already.

The Government has previously suggested that they will not over-regulate the use of PES and would rather leave it to the discretion of each organisation, based on your own determination of risk. Now that same logic has been re-presented to us with The AML/CTF Act. You know your business best. Government will not tell you how to run it, but will encourage, by whatever means available, including legislation, the sensible use of PES to minimize the risk of "bad guys" getting into the Australian Workforce. (ASIC actually call them "Bad Apples" in their Handbook on Reference Checking in the Financial Services Industry – HB322-2007).


So, bottom line is, "You run your own business". Take a sensible risk based view of employment of staff including and especially Board Members who can influence Policy and direction. Put sensible, efficient practices in place to record transactions and identify clients.


Written by The PRM Group
6 December 2007