Law firm Allens Arthur Robinson (AAR) and Chartered Secretaries Australia (CSA) want the Federal Government to allow inter-company tip offs to be exempted from its reform of anti-money laundering laws (AML).
As part of a submission filed on the day that consultation on the draft AML bill closed, CSA hit out at the lack of provision in the bill for group structures. “CSA notes that it is more likely that suspicious transactions will fall through the cracks if entities within a group each have separate AML/CTF programs,” CSA CEO Tim Sheehy said.
“Many groups have over-arching current risk management and compliance programs that could be adapted to include an AML/CTF program and ongoing AML/CTF monitoring activities. Such an over-arching AML/CTF program is more likely to achieve effective outcomes by reaching throughout the group or agent/franchise network. CSA strongly recommends that the Bill be amended to allow corporate groups to take advantage of group efficiencies (for example, by using existing centres of excellence, specialist compliance departments, risk management departments and the like) to develop and conduct a single AML/CTF program on behalf of all entities within the corporate group.”
As part of its submission, AAR argued that reporting entities that are part of the same corporate group should be allowed to share information on suspicious activities rather than solely reporting it to Austrac.
For complex banks and financial services companies, this is a big issue. Firms like Macquarie Bank are made up of many separate entities under one group umbrella. Macquarie has ten Australian Financial Services licenses, according to the Australian Securities and Investments Commission.
“If a reporting entity, and that could be any of a number of reporting entities within the group, makes a suspicious matter report, under the legislation, it can't tell anyone else except Austrac about that,” said Anna Lenahan, a partner at AAR. “What if you are one entity in one of these groups and you are really suspicious about something and need to report it?”
According to the AAR submission, taking the existing approach would not minimise the chance of a company unwittingly laundering money. “As a matter of sound business practice and risk management, if one member of a corporate group has information relevant to an offence or attempted offence it should be able to advise other members of the group of that suspicion, for example, to minimise the likelihood of offences being perpetrated across the group or another member of the group unwittingly facilitating a money laundering or terrorist financing offence,”Peter Jones, a partner at AAR wrote in the submission.
Other jurisdictions globally have made allowances on the issue. In the UK and Hong Kong, AAR said, firms can advise other members of the same corporate group about suspicious transactions, provided the advice does not prejudice an investigation.
“In the United States, FinCEN [the US financial crime agency] has recently issued guidance to the effect that some financial institutions may share suspicious activity reports with domestic and foreign parent entities for the purpose of enabling the parent entity to discharge its oversight responsibititltes or with respect to enterprise wide risk management and compliance with applicable laws and regulations,”wrote Jones.
Meanwhile, CSA also outlined concerns over the impact on small businesses of the AML reforms, and recommended more consultation and a harmonised approach to the fit and proper rules in the bill with the Australian Prudential Regulation Authority’s standards.