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Anti-Money Laundering Compliance Guide

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					Anti-Money Laundering
       Guide
                Anti-Money Laundering Compliance Guide
  1. Introduction

  The Anti-Money Laundering and Counter Terrorism Financing Act became law on 12 December
  2006. The REPORTING ENTITY needs to consider the regulatory risk and business risk.


  2. Staged implementation timetable

Part of Act    Part title                Division titles                           Obligation
                                                                                   commences
Part 1         Introduction              Designated services and definitions       12 December
                                                                                   2006
Part 2,        Identification procedures - Identification procedures for           12 December
except for     etc.                      pre-commencement customers                2007
Division 6                               - Identification procedures for certain
                                         low-risk customers
                                         - Identification procedures etc.
                                         - Re-verification of identity etc
                                         - General provisions
Part 2,        Identification procedures Ongoing customer due diligence            12 December
Division 6     etc.                                                                2008
Part 3,        Reporting obligations of - Suspect Matters                          12 December
Division 1.    reporting entities        - Threshold                               2008
2,3, 4 and 6                             - International Funds Transfer
                                         Instructions
Part 3,        Reporting obligations of Anti-Money Laundering and                  12 June 2007
Division 5     reporting entities        Counter-Terrorism Financing
                                         (AML/CTF) Compliance reports
Part 4         Reports about cross-                                                13 December
               border movements of                                                 2006
               physical currency and
             Bearer Negotiable
             Instruments
Part 5       Electronic funds transfer                                          13 December
             instructions                                                       2006
Part 6       Register of providers of                                           13 December
             designated remittance                                              2006
             services
Part 7       Anti-money laundering                                              12 December
             and counter-terrorism                                              2007
             financing programs
Part 8       Correspondent banking                                              12 June 2007
Part 9       Countermeasures                                                    13 December
                                                                                2006
Part 10,     Record-keeping              Records of transactions, funds         13 December
Divisions 1, requirements                transactions and exemptions            2006
2, 4 and 7
Part 10,     Record-keeping              Records of identification procedures   12 December
Division 3   requirements                                                       2007
Part 10,     Record-keeping              Records about AML/CTF programs         12 December
Division 5   requirements                                                       2007
Part 10,     Record-keeping              Records about due diligence            12 June 2007
Division 6   requirements                assessments of correspondent
                                         banking relationships
Part 11      Secrecy and access                                                 13 December
                                                                                2006
Part 12      Offences                                                           13 December
                                                                                2006
Part 13      Audit                                                              13 December
                                                                                2006
Part 14      Information-gathering                                              13 December
               powers                                                                   2006
Part 15        Enforcement                                                              13 December
                                                                                        2006
Part 16        Administration                                                           13 December
                                                                                        2006
Part 17        Vicarious liability                                                      13 December
                                                                                        2006
Part 18        Miscellaneous                                                            13 December
                                                                                        2006
Schedule 1     Alternative constitutional                                               13 December
               basis                                                                    2006




 3.       Objective

          The objective of the AML/CTF Act is to fulfill Australia‟s international obligations and
          matters of international concern including the need to combat money laundering and
          financing terrorism (ML/TF)

          „Money laundering‟ is defined in section 5 of the AML/CTF Act. It is described by The
          Australian Translation Reports and Analysis Center (AUSTRAC) as follows:

          “… money laundering is the process whereby criminals attempt to hide and disguise the
          true origin and ownership of the proceeds of their criminal activities, thereby avoiding
          prosecution, conviction and confiscation of the criminal funds.”

          It consists of various stages:
                 Placement i.e. first stage of money laundering in which illegal funds or assets are
                  first brought into the financial system
                 Layering i.e. the placed funds are distanced from their illegal origin by moving,
                  disbursing or disguising them
                 Integration i.e. the funds are reintroduced into the economy for criminals to use and
                  control apparently as legitimate funds.

          “Financing of terrorism” is defined in section 5 of the AML/CTF Act. AUSTRAC
          describes it as:
      “… the financing of terrorism includes financing of terrorist acts and of terrorists
      organizations. It involves a person providing or collecting funds where the person is
      reckless as to whether the funds will be used to facilitate or engage in a terrorist act.”

4.    Regulator

      AUSTRAC is the Australia‟s anti-money laundering and counter terrorism financing
      regulator. Australian Prudential Regulation Authority (APRA) has entered into a
      Memorandum of understanding with AUSTRAC.


5.    Applicability of AML/CTF Act and Designated Services

      The Act covers the financial (including banking, insurance, and superannuation) and
      gambling sectors, bullion dealers and lawyers/accountants (to the extent that they provide
      financial services in direct competition with the financial sector), if they provide listed
      Designated Services. Persons who provide the designated services to customers become
      reporting entities.

6.    Identification and verification – The REPORTING ENTITY must verify a customer‟s
      identity before providing a designated services to a customer. The REPORTING ENTITY
      shall also carry out ongoing due diligence on customers.

7.    Reporting – The REPORTING ENTITY must report suspicious matters: certain
      transactions over a threshold and international fund transfer instructions.

8.    Developing and maintaining an AML/CTF Program – The REPORTING ENTITY
      must have anti-money laundering and counter terrorism financing programs (AML/CTF
      programs). They should be designed to identify, mitigate and money laundering or
      financing risks which the REPORTING ENTITY reasonably face. The REPORTING
      ENTITY must comply with such programs.

9     Record keeping

9.1   Transaction Records – They are records containing information relating to the provision
      of a designated service to a customer.

      The REPORTING ENTITY must retain the transaction records by retaining: (a) the
      original record; or (b) a copy of the record; or (c) an extract of the record showing the
      prescribed information. The prescribed information means the information relating to the
      provision of the designated service to the customer.

      Customer generated transaction documents must also be maintained by keeping either the
      original record or copy of the record. Customer generated transaction documents are
      documents relating to the provision of designated service by the REPORTING ENTITY.
      They may have been given either by the customer or another person on behalf of the
      customer.

      The REPORTING ENTITY must also retain records relating to transferred ADI accounts.

      Electronic fund transfer instructions must also be retained. When an ADI account is
      transferred between financial institutions the REPORTING ENTITY must transfer and
      retain relevant records.

      Record keeping – Certain records including documents given to the REPORTING
      ENTITY by customers are required to be maintained for 7 years.

9.2   Identification Records – They are records of identification procedures carried out by the
      REPORTING ENTITY or on behalf of the REPORTING ENTITY by an authorized
      person. An authorized person may be:

          An internal agent: an employee;

          An external agent; and

          The REPORTING ENTITY; or

          A person accredited under the AML/CTF Rules;

      The authorization must be in writing but the responsibility will remain to the REPORTING
      ENTITY.

      The identification procedure records must be maintained by the REPORTING ENTITY
      even if the identification is carried out by an authorized person.

9.3   Due Diligence Records – They are records of due diligence assessments performed in
      relation to correspondent banking relationships. Either the original or the copy must be
      maintained.

9.4   The records must be maintained for 7 years. There are penalties for failure to retain the
      records.

10    Compliance Reporting

      The REPORTING ENTITY is required to provide AUSTRAC reports on their compliance
      with AML/CTF Act, Regulations and AML/CTF. The reports have to be lodged 3 months
      after the end of that period. The REPORTING ENTITY must be prepared to provide to
      AUSTRAC the first report on whether and to what extent The REPORTING ENTITY is in
      compliance especially on recording and electronic funds transfer instructions.

11    AML/CTF Program
       The REPORTING ENTITY is required to develop and maintain and comply with its
       AML/CTF Program. The REPORTING ENTITY must document how it has identified,
       mitigated and managed the ML/TF risk occurring through the designated services. The
       program also should set out the applicable customer identification procedures.

       There are three (3) types of AML/CTF programs: standard, joint and special. The standard
       and special programs are divided into Parts A (General) and Part B (Customer
       Identification). Special AML/CTF program contains only Part B. The standard program
       applies to individual reporting entities. The joint program applies to a reporting entity
       which is a member of a designated business group. The special program applies only to a
       holder of an Australian Financial Service licence who arranges for a person to receive a
       designated service i.e. the financial planner.

11.1   Part A – General

       The primary purpose is to identify, mitigate and manage the risk that the provision of a
       designated service by the REPORTING ENTITY might knowingly, inadvertently or
       otherwise involve or facilitate ML/TF.

       Identification means the assessment and recognition of ML/TF risks associated with the
       designated service provide by the REPORTING ENTITY. Mitigation means analysis of the
       identified ML/TF risks, prioritisation of the risks occurring to likelihood of the occurrence
       and the consequences and the developing a strategy to prevent the risk. Management means
       monitoring and reviewing mitigation strategies.

       In Part A, the REPORTING ENTITY should include the following:

          ML/TF risk awareness training program. This program includes the obligations the
           REPORTING ENTITY has under the AML/CTF Act, ML/TF risk which the
           REPORTING ENTITY may face and the potential consequences of that risk and the
           processes and procedures which are relevant to the work carried out by employees.

          Employee due diligence program. the REPORTING ENTITY must screen their
           employees for ML/TF risks. The REPORTING ENTITY will consider the potential for
           ML/TF risks in relation to individual positions in The REPORTING ENTITY and
           apply the appropriate employee due diligence or screening. Example, frontline staff
           may face different risk potential compared to treasury staff.

          Oversight by board and senior management. The REPORTING ENTITY must ensure
           that processes are developed and implemented for regular reporting to and monitoring
           by senior management and feedback from them. The oversight by the senior
           management should include review, at set intervals, of the continuing adequacy of the
           AML/CTF program.
          AML/CTF Compliance Officer. The REPORTING ENTITY should consider a number
           of factors in relation to disposition, including independents, seniority, accountability,
           reporting lines, access to executive/board and relevance of the competencies of the
           incumbent compliance officer.

          Independent review of the AML/CTF Program. The pros and cons of having the review
           undertaken by and internal area such as internal audit or an external review should be
           assessed by the REPORTING ENTITY.

          AUSTRAC feedback. The feedback from AUSTRAC on the REPORTING ENTITY‟s
           own program and in relation to industry-wide matters.

       If the REPORTING ENTITY has reasonable grounds to believe that a customer of a
       designated service has information that is likely to help the REPORTING ENTITY comply
       with Part A, the REPORTING ENTITY could, by written notice, request the customer to
       provide such information.

       An inadequate Part A program is associated with a number of risks including, but not
       limited to:

          failure to include all the mandatory components;

          failure to conduct a proper ML/TF risk assessment;

          failure to gain board or executive approval for the program;

          insufficient or inappropriate employee due diligence (for example employee screening
           is not commensurate with the money laundering or terrorism financing risk associated
           with the employee‟s position);

          frequency and level of risk awareness training not being aligned with the potential risk
           of exposure to money laundering or terrorism financing;

          changes in business functions not reflected in the AML/CTF program (for example, the
           introductions of a new product or distribution channel);

          feedback from AUSTRAC not acted on (for example, advice about an emerging risk
           related to money laundering or terrorism financing);

          failure to independently review the content and application of the AML/CTF program.

           The risk which the REPORTING ENTITY may reasonably face that the designated
           services might involve or facilitate money laundering or financing of terrorism is
           identified as follows:

11.1.2. The inherent risk associated with such designated services will in particular relate to:
            customer risk;

            products or services risk;

            distribution channel risk; and

            jurisdiction risk.

11.1.3. Conducting an ML/TF risk assessment

      (1)       Guides
                To conduct risk assessment, the REPORTING ENTITY may use the following
                sources:

                       AUSTRAC Guidance Note: Risk management and AML/CTF programs
                       AS/NZS 4360:2004 Risk Management
                       ML/TF Risk Principles Framework – developed by the joint government-
                        industry working group based on AS/NZS 4360:2004.
                       The Australian Standard for Compliance Program (AS 3806)
                       The Australian Compliance Institute‟s Protocols for Reviewing and
                        Assessing the Adequacy, Effectiveness and Efficiency of Compliance
                        Programs

      (2)       International Resources

                The following Australian or international resources are available to be used to help
                identify, mitigate and manage risks:

                AUSTRAC www.austrac.gov.au

                Australian Bureau of Statistics – including crime and justice www.abs.gov.au

                Australia.gov.au – guidance of the Australian government and State and Territory
                agencies to assess risks associated with ML/TF www.australia.gov.au
                Australian lists and sanctions

                Australian Attorney-General‟s Department – List of terrorist organizations
                www.nationalsecurity.gov.au and www.ag.gov.au

                Reserve Bank of Australia – international financial sanctions
                www.rba.gov.au/MarketOperations/International/FinancialSanctionsCashReporting/

                International organizations

                Financial Action Task Force www.fatf-gafi.org
Asia pacific group on money-laundering www.apgml.org

Caribbean Financial Action Task Force (CFATF)

Eurasian Group on combating money laundering and financing of terrorism (EAG)

Intergovernmental Action Group against Money-Laundering in Africa (GIABA)

Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)

FATF on Money Laundering in South America (GAFISUD)

Middle East & North Africa Financial Action Task Force (MENAFATF)

Council of Europe‟s action against money laundering and financing of terrorism
(OGBS)

The Egmont Group of Financial Intelligence Units www.egmontgroup.org

United Nations Office on Drugs & Crime www.unodc.org

European Union – Third Directive www.europa.eu

Basel Committee on Banking Supervision www.bis.org

The Wolfsberg Group www.wolfsberg-principles.com

Foreign lists and sanctions

Financial Action Task Force – Non-Cooperative Countries and Territories list
www.fatf-gafi.org

In February 2000, it listed 25 countries as not cooperating. Currently, there are no
countries on the Non-Cooperative Countries and Territories list.

U.K. – HM Treasury – Consolidated List of Financial Sanctions Targets www.hm-
treasury.gov.uk/documents/financial_services/sanctions/fin_sanctions_index.cfm

European Union – financial sanctions list

www.ec.europa.eu/comm/external_relations/cfsp/sanctions/list/consol-list.htm

United States Treasury, Office of Foreign Assets Control
www.treas.gov/offices/enforcement/ofac/index.shtml
                     Foreign Jurisdiction Assessment

                     Financial Action Task Force – mutual evaluation report - www.fatf-gafi.org.

                     United States Department of State – International Narcotics Control
                      Strategy Report – www.cia.gov/cia/publications/factbook/index.html
                     Transparency International – Corruption Perceptions Index –
                      www.transparency.org
                     United Nations Office on Drugs and Crime –
                      http://www.unodc.org/unodc/en/money-laundering/index.html
                     International Money Laundering Information Network –
                      www.imolin.org/imolin/index.html
                     The International Monetary Fund / World Bank – Financial Sector
                      Assessment Program – www.worldbank.org/finance/html/fsap/html and
                      http://www.imf.org/external/np/fsap/fsap.asp
                     Financial Action Task Force – Non-Cooperative Countries and Territories
                      list – www.fatf-gafi.org
                     U.K. – HM Treasury – Consolidated List of Financial Sanctions Targets –
                      http://62.164.176.164/d/sanctionsconlist.htm
                     European Union - financial sanctions list –
                      www.ec.europa.eu/comm/external_relations/cfsp/sanctions/list/consol-
                      list.htm
                     United States Treasury, Office of Foreign Assets Control
                      http://www.treas.gov/offices/enforcement/ofac/index.html

11.2   Part B - Appropriate risk based systems and controls

       The procedures set out herein will enable the REPORTING ENTITY to be satisfied that:

       (i)     a customer is the individual that he or she claims to be; or

       (ii)    in the case of a non-individual customer, the customer exists and in certain cases,
               the relevant details about beneficial owners and beneficiaries (including partners
               and trustees) are provided;

11.2.2. The procedures will enable the establishment of whether and to what extent any additional
        KYC information should be collected and/or verified, depending on the risk level the
        REPORTING ENTITY has assessed in providing the designated service to that customer.

11.2.3. The procedures will enable the REPORTING ENTITY to determine what kind of
        documentation and/or electronic data is reliable and independent for verification purposes.

11.2.4. The procedures will enable the REPORTING ENTITY to be reasonably satisfied as to the
        identity of the customer (and its beneficial owners and beneficiaries where applicable).
11.2.5. The Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument
        2007(No.1) applies in respect of identification of the customer.

12.    Ongoing Due Diligence

12.1   The REPORTING ENTITY has, an obligation to monitor customers and their transactions
       on an ongoing basis i.e. Ongoing Customer Due Diligence (OCDD). The OCDD will help
       to identify, mitigate and manage any AML/CTF risks that may arise from providing one or
       more designated services to the customers. These obligations will apply to all customers to
       whom the REPORTING ENTITY provides designated services. They will include pre-
       commencement customers and customers whose KYC information was initially collected
       and/or verified by another entity i.e. agent. Pre-commencement customers are customers to
       whom a designated service has been provided by the REPORTING ENTITY before 12
       December 2007.

12.2   Mandatory Components of OCDD

       The mandatory components of OCDD consist of:

       (a)    collection and verification of additional „know your customer‟ (KYC) information.

       (b)    a transaction monitoring program

       (c)    an enhanced customer due diligence program.

12.3   Mandatory component one: collecting and verifying additional KYC information.

       The REPORTING ENTITY will determine when it may be necessary to collect further
       KYC information or update or verify existing KYC information. The appropriate level of
       KYC information to be collected and verified will be determined before the business
       relationship with the customer commences and monitored on an ongoing basis.

       The REPORTING ENTITY will need to collect additional KYC information or update or
       verify existing KYC information where:

            a significant transaction or series of transactions (in amount, size or volume) takes
             place

            a significant change occurs in the way an account was previously operated by the
             customer, or

            there are some doubts about the identity of a customer

            customers are residing in or from high-risk countries; for determining the high-risk
             countries, the sources in 10.1.5 under Jurisdiction Risk will be used

            foreign companies are not registered in Australia
           the customer is a family trust or complex trust

           the customer is a politically exposed person

           customers are individuals of high net-worth

           charities, religious organizations and incorporated or unincorporated associations

           government bodies

           foreign unlisted companies registered in Australia if they are from high-risk countries

For other indicators please refer to Annexure 1: AUSTRAC money laundering and terrorism
financing indicators.

„Significant‟ means anything with the value of AUD$10,000.00 or more.

If any of the above occurs, additional or updating of KYC information should be obtained and
verified.

12.4   Mandatory component two: Transaction monitoring program

       The REPORTING ENTITY should monitor and identify the transactions which appear to
       be suspicious within the terms of the AML/CTF Act‟s “Suspicious Matter” reporting
       provisions. A transaction is „suspicious‟ if it satisfies one or more of the conditions
       specified in section 41 of the AML/CTF Act which gives rise to a SMR obligation. Further,
       it should detect complex, unusual large transactions and unusual patterns of transactions
       which have no apparent economic or lawful purpose.

       The REPORTING ENTITY must adopt a 3-step process:

       1. Monitor all customer transactions in accordance with the REPORTING ENTITY‟s
          policies, systems and procedures.

       2. Identify suspicious transactions (within the terms of section 41 of the AML/CTF Act).

       3. Take appropriate action.

       As a result of the monitoring, the REPORTING ENTITY should detect:

          complex, unusual large transactions, and

          unusual patterns of transactions which have no apparent economic or lawful purpose.

12.5   Mandatory component 3: Enhanced Customer Due Diligence Program

       This must be applied when:

          the REPORTING ENTITY determines that there is high ML/TF risk, or
            a suspicion has arisen under the SMR provisions in section 41 of the AML.CTF Act.

13     Report to AUSTRAC of suspicious matters

13.1   Suspicious matters

       The REPORTING ENTITY must, if it has reasonable grounds to suspect information it has
       about the provision or prospective provision of or requests or enquires for designated
       services, report to AUSTRAC as follows:

       (1)      If information:

                (a)   May be relevant to investigation of an evasion or attempted evasion of a
                      Commonwealth taxation law or corresponding state, territory or foreign law;
                      or

                (b)   may be relevant for investigation or prosecution for an offence under the law
                      of the Commonwealth state or territory or corresponding offence under
                      foreign law; or

                (c)   may be of assistance in the enforcement of the Proceeds of Crimes Act or
                      corresponding Act of a state or territory or foreign law;

       – within 3 business days from the date of which the suspicion is formed.

       (2)      If the provision or prospective provision of the designated service is preparatory to
                the commission of a financing of terrorism offence or the information is relevant the
                investigation or prosecution of a person for financing of a terrorism offence
             – within 24 hours from the time of forming the suspicion.

       The reporting will need to be met even if there is no suspicious transaction.

13.2   Suspicious matters report

       The report must contain the following details:

       1.       full name of the customer seeking the service or conducing the transaction(the
                customer)

       2.       customer‟s business and/or residential address, not being a PO Box address

       3.       customer‟s occupation, business or principal activity, if known

       4.       customer‟s date of birth, if known

       5.       customer‟s country of citizenship, if known
       6.     sources relied upon to verify the customer‟s identity including:

              (a)     the identity document type – for example, passport, driver‟s licence,
                      Medicare card, or key card

              (b)     the identity document‟s unique number – for example, the passport, driver‟s
                      licence, Medicare card, or key card number

              (c)     country or organization that issued or produced the identity document – for
                      example, Australia, the Roads and Traffic Authority of New South Wales,
                      Medicare or the financial institution

       7.     full details of any other name used by the customer of which the REPORTING
              ENTITY is aware

13.3   No Tipping

       The REPORTING ENTITY shall not tip of the person who is the subject of the report.

14     Report of transactions of $10,000 or more

       This is similar to the reporting under the FTRA.

15     International fund transfer instructions

15.1   Where the designated services are performed in relation to an international funds transfer
       instruction, reporting to AUSTRAC must be done within 10 business days after the day on
       which the provision of the service commenced. The definition of International Funds
       Transfer Instructions is set out in section 43 of AML/CTF Act. The instruction must
       involve a permanent establishment of the originating institution or destination institution or
       the transferor or transferee remitting entity in Australia or the transfer of funds is from the
       originating entity‟s account in Australia to the ultimate recipient‟s account in Australia.

15.2   The report of services include:

           An originating institution accepting the funds transfer instruction

           The destination institution (which may be the originating institution if it is a same
            institution funds transfer) making money available to the recipient (who may be the
            originating entity) (this is defined broadly enough to cover funds transfer by a person
            to the same person‟s account with the same institution or with another institution)

           Where value is transferred under a designated remittance arrangement (where neither
            the person who remits the money or the person who makes money available to the
            ultimate transferee is an ADI)
           Where a reporting institution accepts money or property from a transferor for
            remittance or makes money or property available to an ultimate transferee as a result
            of a remittance.

15.3   The REPORTING ENTITY must include information about ultimate source of the funds
       transfer instruction in all the funds transfer electronic messages which make up in funds
       transfer chain. The originating institution must verify the originator information.

       Unless appropriate originating information has been received, the originating institution
       and the intermediate institutions in the funds transfer chain may not be able to pass on the
       funds transfer instruction to another person in the chain.

       The originating institution must not pass or take any action to carry out a fund‟s transfer
       instruction without having previously obtained the full originating information. That
       information will consist of the name of the originating entity and one of the following:

           The full business or residential address (not a post office box) of the originating entity

            A government issued identification number or an identification number given by the
            originating institution to the originating entity

           The date and place of birth of the originating entity if it is an individual

       If the money is to be transferred from an account held by the originating entity, the account
       number or, if the money is not transferred from an account, a number that is a unique
       reference number for the funds transfer generated by the originating institution.

       The originating institution must retain the full originating information and if AUSTRAC
       requests such information, the originating institution must provide within 3 business days;
       if the request is made within 6 month. Other wise the information must be given within 10
       business days.

       If the destination institution requests the full originating information, the originating
       institution must provide it within 20 business days or such longer period as agree by
       AUSTRAC.

       The originating information must not transfer instruction to another person in the chain
       unless that instruction includes the appropriate originating information. The appropriate
       originating information is the full originating information or limited in some circumstances
       to the account number from which the money is transferred or a unique reference number
       for the transfer generated by the originating institution.

       An interposed institution which receives the funds transfer instruction or passes it through a
       permanent establishment in Australia must not transfer the instruction to another institution
       in the chain unless the instruction includes so much of the appropriate originator
       information as was received by it.

       A destination institution with an Australian geographic link is not automatically stopped
       from giving effect to an international funds transaction which it receives even if the
       instruction does not include appropriate originating information. If the destination
       institution has received two or more instruction from a particular institution and at least one
       of them does not include the appropriate originator information, the AUSTRAC will
       require the destination institution the request the originating institution to provide
       appropriate originator information involve future instructions. The destination institution
       must report to AUSTRAC an outcome.

       A destination institution may refuse to make the transferred money available to the
       intended recipient unless the appropriate originator information is given to destination
       institution.

16.    Correspondent Banking Relationship

16.1   Correspondent Banking relationship involves the provision of the banking services by one
       financial institution to another, where the financial institutions carry on activities or
       business at or through permanent establishments in different countries and the banking
       services are of a kind described in AML/CTF Rules. The second institution may be a
       subsidiary or a related company of the first institution.

       Chapter 2 of the Anti-Money Laundering and Counter Terrorism Financing Rules
       Instruments 2007 (No.1) provides that the definitions of Correspondent Banking
       Relationship relates only to Banking Services involving nostro or vostro accounts.

16.2   Prohibition – there are two provisions:

           The prohibition on entering into a correspondent banking relationship with a shell
            bank.
           The requirements to conduct risk and due diligence assessment in relation to
            correspondent banking relationships.

16.3   Use of resources relating to correspondent banking

           www.wolfsberg-principles.com/corresp-banking.html
           www.bis.org/publ/bcbs85.pdf
           AUSTRAC guidance note: Correspondent banking

17.    Privacy and access.

       The information provided to AUSTRAC are, subject to exceptions, can not be disclosed by
       AUSTRAC. There is an exception as a disclosure to the Australian Taxation Office and
      certain other government bodies. The REPORTING ENTITY can not tip off the customer
      of any report given on suspicious transaction or other information provided to AUSTRAC.


18.   AUSTRAC monitoring and enforcement powers

      AUSTRAC has monitoring and enforcement powers. The enforcement powers include:
      In accordance with section 147 of the AML/CTF Act, an authorised officer may enter a
      reporting entity‟s business premises either with consent or under a monitoring warrant at
      any reasonable time of the day and exercise the monitoring powers. These monitoring
      powers enable an authorised officer to:

            search the reporting entity‟s premises for any:
             o       compliance records;
             o       system used by a reporting entity at the premises for record keeping;
             o       reports under the Act that are retained at, or accessible from the premises;
             o       system used by a reporting entity in connection with preparing, sending or
                     retaining reports under the AML/CTF Act;
             o       other thing on the premises that may be relevant to the obligations of a
                     reporting entity under this Act, the Regulations or the AML/CTF Rules;

            examine any:
             o     activity conducted on the reporting entity‟s premises that may relate to
                   information provided under this Act, the Regulations or the AML/CTF
                   Rules;
             o     thing on the reporting entity‟s premises that may relate to information
                   provided under this Act, the Regulations or the AML/CTF Rules;

            take photographs or make video or audio recordings or sketches on the reporting
             entity‟s premises of any such activity or thing;

            inspect any document on the reporting entity‟s premises that may relate to
             information provided under this Act, the Regulations or the AML/CTF Rules; and
             take extracts from, or make copies of, any such document;

            take onto the reporting entity‟s premises such equipment and materials as the
             authorised officer requires for the purpose of exercising powers in relation to the
             premises;

            secure a thing for no more than 24 hours;

            operate:
             o      equipment at the premises to see whether the equipment or data storage
                    device that is at the premises and can be used with the equipment or is
                    associated with it, contains information that is relevant to assessing the
                    correctness of information provided under this Act;
       o      facilities at the reporting entity‟s premises to put the information in
              documentary form and copy the documents so produced;
       o      facilities at the premises to transfer the information to a disk, tape or other
              storage device that is brought to the premises for the exercise of the power
              or is at the premises and the use of which for the purpose has been agreed in
              writing by the occupier of the premises;

      remove from the premises a disk, tape or other storage device to which the
       information has been transferred.

Section 150 of the AML/CTF Act also enables an authorised officer entering premises by
consent or under a monitoring warrant to ask the occupier to answer any questions or
produce any documents relating to the operation of the AML/CTF Act, Regulations or
AML/CTF Rules. The penalty for non compliance with section 150 is imprisonment for 6
months or 30 penalty units or both.
                                            Annexure 1

AUSTRAC money laundering and terrorism financing indicators
The following is a list of indicators ('red flags') identified within the case studies provided in the
AUSTRAC Typologies and Case Studies Report 2007. Indicators by themselves may not always
be immediately indicative of suspect financial or criminal activity but may give rise to further
monitoring and due diligence.

      the transaction was inconsistent with the customer‟s profile
      associations with multiple accounts under multiple names
      drafts cashed for foreign currency e.g. euros, USD
      cash deposited domestically with the funds subsequently withdrawn from ATMs offshore
      cheques issued to a family member(s) at arms length from person
      cash used to purchase large amounts of gold
      cheques made out regularly to companies and individuals not linked to the account
      deposit of gambling proceeds into a foreign bank account
      depositing multiple large amounts of cash and receiving multiple cheques drawn on that
       account
      early surrender of insurance policy incurring substantial loss
      elaborate movement of funds through different accounts
      frequent early repayments of loans
      frequent deposits of winning gambling cheques followed by immediate withdrawal of funds
       in cash
      frequently playing games with low returns but with higher chances of winning
      frequent transfers indicated as loans sent from relatives
      frequent remittance of bearer negotiable instruments e.g. bank drafts, offshore
      funds transferred to a charity fund
      gold transported by the individual but purchased with funds drawn from a company account
      high level of funds placed on stored value cards
      high volume of transactions within a short period
      investment cheques issued to a family member
      insurance policy being closed with request of the payment to be made to a third party
      accounts
      investment funds sent to 'interesting' countries
      inserting funds into slot machines and immediately claiming those funds as credits
      insurance policy cashed outside the jurisdiction of purchase
      large amount of cash used to purchase insurance policy
      large sums credited into accounts from 'interesting' countries
      large cash deposits used for investment
      large cash deposits into company accounts
      large amounts of currency exchanged for traveller‟s cheques
      large purchases of gold with transportation of the gold conducted by the individual
      leaving large amounts of cash with a bookmaker and requesting a cheque in return
   large amounts of cash from unexplained sources
   multiple individuals sending funds to one beneficiary
   multiple chip cash-outs on the same day
   multiple cheques cashed into one bank account
   multiple loans obtained over a short period of time with repayments made in cash
   multiple issue of stored value cards and debit cards accessed offshore
   multiple transactions of a similar nature on the same day in different locations
   numerous bank drafts purchased domestically and subsequently deposited internationally
   obtained loan and repaid balance in cash
   purchasing high value assets (e.g. motor vehicles) followed by immediate resale with
    payment requested via cheque
   purchase of high-value assets e.g. diamond ring, bullion, motor vehicle, property
   purchase of an insurance policy followed by immediate surrender
   purchasing and cashing out casino chips with no gaming activity
   physical carriage of cash and/or bearer negotiable instrument out of Australia
   regular sale of large amounts of precious metals and jewellery
   regular sale of large amounts of gold with payment received in cash
   purchase of multiple money orders
   regular use of stored value card to withdraw funds overseas
   regular claims made less than the premium payments
   sale of large amounts of gold from an individual
   structuring cash to purchase traveller‟s cheques
   structuring the placement of betting transactions
   structuring the purchase of bank drafts
   structuring cash deposits/withdrawals
   structuring chip cash-outs
   structuring wire transfers
   transfers from company accounts to private betting accounts
   third party present for all transactions but does not participate in the actual transaction
   transferring funds into third-party accounts
   using third parties to undertake wire transfers
   use of an intermediary to make large cash deposits
   use of intermediary to make insurance policy payments
   unusually large transfer of money from a individual to a business
   use of gatekeepers e.g. accountant and lawyer, to undertake transactions
   use of internet banking to transfer illicit funds into „mule‟ accounts
   use of multiple names to conduct similar activity
   use of an offshore company to pay the premiums for a insurance policy taken out privately
    by individuals
   use of safety deposit box to store large amounts of cash
   use of third parties to undertake structuring of deposits and wire transfers
   unexplained income inconsistent with economic situation
   'u-turn' transactions occurring with funds being transferred out of Australia and then
    portions of those funds being returned
   use of internet banking to frequently access Australian-based accounts internationally
   use of a remittance dealer to send a large amount of cash
   use of a remittance dealer to send large cash amounts overseas
   use of third parties to purchase gaming chips
   use of gatekeeper (e.g. accountant) to structure deposits and purchase real estate
   use of a third party to gamble proceeds through casinos
   use of companies to move funds under the guise of legitimate transactions
   use of non-resident accounts
   use of false and stolen identities to open and operate bank accounts
   withdrawal of a large amount of funds in cash
   wire transfers to tax haven countries e.g. British Virgin Islands
   wire transfers from third parties located in tax haven countries
   wire transfers used to purchase insurance policies