Anti-money laundering rules ‘inflexible’ for sole practitioners, small firms
The rules and the language contained in AUSTRAC’s exposure draft for the new anti-money laundering rules do not provide sufficient flexibility for smaller firms, professional bodies have cautioned.
Professional bodies have called for minor changes to proposed updates to the anti-money laundering and counter-terrorism financing rules by AUSTRAC to make it easier for smaller accounting firms to comply.
Following the passage of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) amendment bill in November last year, AUSTRAC is updating the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No.1).
In December last year, AUSTRAC released an exposure draft with new rules to provide reporting entities with more detail on their AML/CTF obligations.
CA ANZ, the Institute of Public Accountants and CPA Australia said many accountants will look at the new rules to determine what steps need to be taken to be compliant with the reforms and the time frames for doing so.
"As the new rules will be the arbitrator between a reporting entity and an independent evaluator who reviews the effectiveness of a reporting entity's AML/CTF program, the new rules must provide clarity on an RE’s obligations under law," the three bodies said.
The professional bodies are primarily concerned that the rules use language such as 'governing body' and 'board' to which new reporting entities such as sole practitioners and small and micro practices are unable to relate.
The submission noted that while the consultation paper adequately explains how such terms relate to an individual, micro or small reporting entity, they would like to see these explanations also included in the new rules where such clarification is beneficial.
The bodies also questioned the requirement for individual, micro and small reporting entities to undertake an independent evaluation of their AML/CTF program.
"As there are no qualifications required of evaluators, they will not be accredited or regulated in any way, and the evaluation report is not provided to AUSTRAC, this obligation is simply a cost to the RE," they said.
"The lack of qualifications for evaluators means there is no credibility with respect to their findings and any recommendations to address adverse findings may not be compliant with the regime or improve the effectiveness of an AML/CTF program and could instead be detrimental to a program."
Given that the evaluation report is not submitted to AUSTRAC, the bodies said this compliance obligation fails to provide actionable intelligence to AUSTRAC.
"While we acknowledge the intent is to meet the recommendations of the Financial Action Task Force (FATF), we understand there is flexibility in how such recommendations are applied in a jurisdiction providing that what a regime requires achieves the desired outcomes," the bodies said.
"Requiring all REs, irrespective of risk or size, to undertake an independent evaluation appears to be a compliance burden purely for the sake of compliance."
The professional bodies said the appropriate tool for AUSTRAC to assess the effectiveness of programs for low-risk reporting entities is the annual compliance report that all reporting entities must complete.
"AUSTRAC can tailor the questions to reflect current trends, utilise its knowledge of high-risk factors and further probe unsatisfactory responses using a risk-based approach," the submission said.
