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AML/CTF Reviews - The importance of independence

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Scott Tobutt


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AML/CTF Reviews - The importance of independence

Posted 23 Dec 16 by Scott Tobutt
The Anti-Money Laundering and Counter-Terrorism Financing Act (AML/CTF) has been around in Australia since 2006 but effective implementation of the requirements by reporting entities has been hit and miss.

In order to stay on the right side of AUSTRAC and give yourself confidence that your AML/CTF Program is compliant, effective, and averts the unwanted attention of the regulator, we recommend undertaking a Health Check.

Our AML team has worked with reporting entities in Australia and overseas and it is abundantly clear that some are better than others at complying with the, often onerous, AML/CTF obligations.

Most reporting entities want to comply with the letter and the spirit of the law but due to a lack of access to experienced AML/CTF practitioners, either internal compliance officers or external experts, they have fallen short. Sometimes it is simply a case of paralysis due to over-analysis, resulting in compliance being thrown into the too hard basket. But whatever the reason there is always room for improvement.

And it does not need to be complicated. There are some critical areas that need to done correctly including: undertaking an adequate Money Laundering/Terrorism Financing (ML/TF) risk assessment, frequent and appropriate training, and ongoing customer due diligence, to name a few of the areas regularly scrutinised by the regulator.

The most useful method to check the health of your AML/CTF Program is by commissioning an Independent Review (IR).

The rules say that reporting entities should undertake a review of Part A of their AML/CTF Program on a regular basis, and that this review should be undertaken by an independent party such as the internal audit team, external auditors or an external AML/CTF expert. A common mistake we see commonly is for the compliance department or risk management team to undertake the review which simply will not cut it when it comes to the regulator’s independence test.

During an inspection one of the first things the regulator will ask for is a copy of the most recent IR, and if it is not deemed to be sufficiently “independent” then you are on the back foot straight away.

In the future it is the smaller end of town that potentially stands to be most impacted by a range of upcoming changes to the AML/CTF regime. Due to the expected increase from 14,000 current reporting entities to over 100,000 by 2018 it seems inevitable AUSTRAC will place even more reliance on IRs.

A key recommendation arising out of a recent Attorney General’s Department review of the AML/CTF Act 2006 was the extension of the AML/CTF regime to Designated Non-Financial Businesses and Professions (DNFBP’s), which means the new AML/CTF regime will capture real estate agents, lawyers and accountants to name a few. There is sure to be a significant impact felt in these sectors.

Independent Reviews are a legal requirement of the AML/CTF Act, but they are also one of the best ways to check the health of your program and provide you with the confidence that you are meeting your regulatory obligations, while providing peace of mind.

Please contact PKF’s specialist AML team for details on their AML services, including independent reviews, program implementation and compliance and training.


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