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Anti-Money Laundering Requirements

Background Checks, Employment Verification, Fraud, Police Checks, Publications, Qualification Verification, Reference Check, Why PeopleCheck

Background

The Australian Transaction Reports and Analysis Centre (AUSTRAC) works to protect Australia’s economy, whilst identifying threats and criminal activity relating to the financial system.

AUSTRAC is responsible for identifying anti-money laundering (AML) and counter-terrorism financing (CTF) and is Australia’s regulator for more than 14,000 businesses; regulating services in five key sectors:

  • Financial services
  • Gambling
  • Bullion dealers
  • Remittance service providers
  • Cash dealers

To assist with AUSTRAC’s regulation of financial services, the Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF Act) 2006 was implemented as part of a legislative package which brings Australia into line with international best practice to deter money laundering and terrorism financing. Further, the Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules) should be used in accordance with the AML/CTF Act as it assists with clarifications of a reporting entity’s regulatory obligations.

The AML/CTF Act and the supporting AML/CTF Rules together implement a principles-based and risk-based approach to regulation.

The AML/CTF Program

The AML/CTF Program is one of the requirements set out within the AML/CTF Act and is the operational framework a reporting entity is to implement in order to meet its compliance obligations. The program covers identifying, managing and reducing  the money laundering and terrorism financing risk potentially faced by a reporting entity.

Reporting entities begin by conducting a Money Laundering/Terrorism Finance (ML/TF) Risk Assessment that includes developing policies, procedures and controls to minimise and manage that risk. Conducting a Risk Assessment will determine how the entity meets their obligations to comply with regulation.

Employee Due Diligence

An Employee Due Diligence program is a mandatory consideration for screening employees to minimise the exposure to risks outlined in the AML/CTF program. Typically, this relates to high-level and/or high-risk roles where the individual may be in a position to facilitate the commission of money laundering or financing of a terrorism offence.

The principles of a risk-based approach to screening employees is similar to those used when establishing the AML/CTF program.  According to the requirements of the  employee due diligence program under the AML/CTF Act, a company should consider an individual’s:

  • Identity – Identify and verify the identity of prospective or existing employees; and
  • Employment History – Confirm previous employment via references in order to determine if they are suitable to be employed in a particular position in the business.

If there is an employee that is engaged in a role that poses a high risk (e.g. has access to business and/or customer financial information or is of senior authority), the employer may consider additional processes such as determining whether the person has:

  • A criminal record;
  • Take advantage of the laws relating to bankruptcy; or
  • Lived in high risk countries that are subject to sanctions by Australia.

Customer Due Diligence

An additional part of the AML/CTF program is ensuring that a reporting entity knows the customer and understands the customers financial activities. An organisation needs to be confident that the customer is who they claim to be.

Customer due diligence requirements include:

  • Collecting and verifying customer identification information;
  • Identifying and verifying the beneficial owners of a customer;
  • Identifying whether a customer is a Politically Exposed Person (PEP) or an associate, and taking steps to establish the source of funds used during the business relationship or transaction; and
  • Obtaining information on the purpose and intended nature of the business relationship.

Industry Best Practice

Best practice throughout the industry extends employee due diligence to cover all employees, even those not deemed as necessarily high-risk.

Screening programs will most often also include almost all aspects of customer due diligence for checking of PEP databases and global watch lists. Commonly referred to as an “AML Check”, global watch lists is usually a search of global databases and sanctions lists (e.g. OFAT, DFAT) that assist with identifying the risks associated with individuals and their potential involvement with money laundering, terrorism financing, Politically Exposted Persons, wanted criminals and an overall threat to national security.

Conclusion

PeopleCheck recommend undertaking a variety of background checks in line with the AML/CTF Act. For best practice, a background checking program should combine employee due diligence and customer due diligence.

The background checks themselves are not mandatory, rather serving as best practice in order to determine whether a person is fit and proper to carry out the relevant reponsibilities, particularly if the person is engaged in a high- risk role. However, most organisations within the industry see background checking for all employees as a cost effective way to meet some of their compliance requirements and provide additional benefits to their business.

AML Background Checking
Recommended Background Checks Standard Guidelines
Police Check Does the individual hold a criminal record?

Must be undertaken through a state, territory or federal police force or accredited service provided.

Rescreen recommended every 12 month.
Overseas police checks (where possible) Lived in high-risk countries previously? Particularly countries that are subject to sanctions in Australia.
Employment Verification Employment history, references etc. in order to determine if an individual is suitable to be employed in a particular position in the business.
Manager Interview/Reference
Qualification Verification
Identity Validation (included as part of the Police Check) Identify and verify the identity of prospective or existing employees.
Combined Court Check Been subject to disciplinary action by a regulator or legal action or has any matters to be considered by the court of law?

Rescreen recommended every 12 months.
Overseas Litigation/Court Checks (where possible) Lived in high-risk countries previously?
Bankruptcy Check Taken advantage of the laws relating to bankruptcy?

Rescreen recommended every 12 months.
Overseas Bankruptcy Check (where available) Lived in high-risk countries previously?
International Watch Lists Check Identifying whether a customer is a Politically Exposed Person (PEP).

More Information

For more information on how PeopleCheck can assist with best practice background checking for AML requirements customised for your organisation, please contact us on (02) 4023 0603 or solutions@peoplecheck.com.au.

References

 

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