Issues in MER on agents of individual customers

This document provides a detailed analysis on the issues raised in the MER on agents of individual customers and the rules addressing these issues as per section 89 of AML/CFT Act. It also discusses the methods used by the Australian Government to implement AML/CFT regulatory regime and potential changes needed to implement reporting entity's AML/CFT program. The document also includes a discussion on AFMA code of conduct and code of conduct of another relevant industry.

Running head: ASSESSMENT A
Assessment A
Name of the Student:
Name of the University:
Authors Note:

1
ASSESSMENT A

2
ASSESSMENT A
Contents
Introduction:....................................................................................................................................2
Part a:...............................................................................................................................................2
Brief discussion on issues raised in the MER on agents of individual customers:..........................2
Part b:...............................................................................................................................................5
Rules addressing the issue of agents of customers as per section 89 of AML / CFT Act:..............5
Part c:...............................................................................................................................................7
The way and methods used by the Australian Government to implement AML / CFT regulatory
regime:.............................................................................................................................................7
Part d:...............................................................................................................................................7
Potential changes needed to implement reporting entity’s AML / CFT program:..........................7
Part e:...............................................................................................................................................8
Discussion on AFMA code of conduct and code of conduct of another relevant industry:............8
References:....................................................................................................................................10

3
ASSESSMENT A
Introduction:
The main piece of legislation that regulates the functions of AUSTRAC on behalf of Australian
government is the Anti-Money Laundering and Counter-Terrorism Financing Act 2006.
Enrolling with AUSTRAC is an obligation and compulsory for those service providers that
provide one or more of prescribed and designated services as mentioned in AML/CFT Act.
Subsequent to the enrolment to AUSTRAC such service providers of designated and prescribed
services must also comply with the provisions of AML/CFT Act. In addition to the enrolment
service providers must also register with AUSTRAC if they provide remittance services or
digital currency exchange services. Taking into consideration the provisions of AML / CFT Act
2006 and the guidelines of AUSTRAC the discussion in this document shall provide a detailed
analysis on the various steps taken by a service provider to comply with anti-money laundering
and counter terrorism financing (A., 2018).
Part a:
Brief discussion on issues raised in the MER on agents of individual customers:
Several deficiencies have been identified in the Fourth Round Mutual Evaluation Report (MER)
of FATF and APG on regulations in Australia on due diligence of customers. In fact there have
been number of issues indicating deficiencies in Australia’s regulations of customer due
diligence resulting in technical rating of partially compliant. A brief discussion on the issues
identified are discussed below.
Agents of individual customers is one of the many issues and deficiencies identified in the
customer due diligence. The agents of individual customers must comply with the requirements
of agent principal relationship to ensure there is no conflict of interests however, the deficiency

4
ASSESSMENT A
in agents of individual customer shows the lack of compliance with due diligence requirements
(Ching, 2018).
MER discussion of criterion 10.4:
As per MER discussion criterion 10.4, it is integral for an agent to uphold the agent principal
relationship at any cost. As per the above criterion an agent is only working in behalf of his
principal and should never be involved in any transaction here he is personally interested in his
own capacity. In such case the transaction would said to have contravened the provisions of
MER 10.4 (Georgiou, 2017).
The FATF recommendations:
A detailed recommendation has been provided by FATF to help countries to deal with money
laundering and terror financing. The recommendations also focus specifically where required on
the agency relationship to ensure that there is no contravention with the agent principal
relationship. The recommendations of FATF include the following:
Approach based on risk: Understating the nature of risks of money laundering and terror
financing is crucial in development of appropriate measures to deal with these risks. The anti-
money laundering and counter terrorism financing act would be effective only when the
approach of the countries would be risk based (International Monetary Fund, 2017).
Transparency:
It is important to be transparent as lack of transparency increases the risk of illegal transfer of
money and terror financing acts. Complete transparency on the matter of ownership of money
and other assets is crucial in dealing with money laundering and terrorism financing.

5
ASSESSMENT A
International cooperation:
International cooperation is extremely crucial in dealing with the menace of money laundering
and terror financing since number of off shore and foreign banks accounts are used in money
laundering for the purpose of terror financing and corruption in general. Without international
cooperation it would not possible to nab the culprits and get rid of the menace completely from
the society. A concentrated and combined effort from domestic and international fraternity is
crucial in stopping money laundering and terror financing (Mugarura, 2017).
Interpretative notes to FATF recommendations:
A brief discussion on the interpretative notes is provided below.
Operational standards: Operational standards are the standards to be followed by organizations
and individuals to ensure that there is no scope of money laundering and subsequently terror
financing.
New threats and new policies: To deal with new threats and new policies are formulated and
implemented. Considering the ever changing means and ways of fraudsters to launder money it
is essential to have up-dated policies to deal with new threats of money laundering.
Clarifying obligations: Clarifying obligations is crucial to the organizations and individuals to
implement anti-money laundering initiatives and scopes to deal with the social menace
(Samantha Maitland Irwin, Raymond Choo and Liu, 2017).
Methods assessing technical compliance with the FATF recommendations and effectiveness
of AML / CFT systems:

6
ASSESSMENT A
The methods of assessing technical compliance with the recommendations of FATF to
effectively implement AML/ CFT provisions include use of restrictive policies and procedures
on international fund transfers, wire transfer and transfer of huge sums irrespective of the
working papers and other documents. It is important to ensure that the international fund transfer
does not take place without the approval from appropriate authorities in a country. In case of
Australia it is merely not enough that the fund transfers are within the rules and regulations of
AML/ CFT but institutes such Reserve Bank of Australia and other such financial institutions are
compulsory and crucial to deal with money laundering and terror financing.
Part b:
Rules addressing the issue of agents of customers as per section 89 of AML / CFT Act:
The detailed rules addressing the issue of agents and customers as per section 89 of AML / CFT
are explained below.
Customer identification procedure with individuals: Chapter 30, part 4.2 explains the procedures
to be followed to identify customers with individuals.
Customer identification procedure with companies: Chapter 30, part 4.3 explains the procedures
to be followed to identify customers with companies.
Customer identification procedure with respect to trustees: Chapter 30, part 4.4 explains the
procedures to be followed to identify customers with respect to trustees (Shehu, 2018).
Customer identification procedure with partners: Chapter 30, part 4.5 explains the procedures to
be followed to identify customers with partners.

7
ASSESSMENT A
Customer identification procedure with associations: Chapter 30, part 4.6 explains the
procedures to be followed to identify customers with associations.
Customer identification procedure with co-operatives that are registered: Chapter 30, part 4.7
explains the procedures to be followed to identify customers with registered cooperatives.
Customer identification procedure with government bodies: Chapter 30, part 4.8 explains the
procedures to be followed to identify customers with government bodies.
Document verification: Chapter 30, part 4.9 discusses the importance of document verification.
Electronic data verification: Chapter 30, part 4.10 explains important rules on how to verify
electronic data.
Agents to customers: The rules relating to agent and customer relationship and dynamics are
explained in part 4.11 of Chapter 30.
Beneficial owner details and verification: Part 4.12 of chapter 30 discusses the importance of
beneficial owner details and how to verify the data of beneficial owners.
Politically exposed persons and verification of data: Charter 30 also discusses the need to
identify politically exposed person for collection and verification of relevant data. Part 4.13 have
clearly mentioned the importance of collection of data on politically exposed and beneficial
owners (Teichmann, 2019).
Exemption to the politically exposed person: Part 4.14 of chapter 30 clearly mentions the
exemption of politically exposed person.

8
ASSESSMENT A
Part c:
The way and methods used by the Australian Government to implement AML / CFT
regulatory regime:
In order to implement the provisions of AML / CFT Act 2006, the Australian government has
followed a particular method and pattern to ensure smooth and safe implementation of AML /
CFT Act 2006. Firstly, the Commonwealth government has made a clear distinction between
financial transactions that are allowed and financial transaction that are prohibited. This has
ensured that there is clear line between transactions that are legal and transactions that are not
legal hence, prohibited. The strict punishment for prohibited transactions along with hefty funds
have been made compulsory in the country by the Government of Australia to ensure that the
criminals are completely in the know of the possible harsh punishment of contravention with any
of the provisions of AML / CFT Act 2006. Criminalizing the act of money laundering has helped
the government in implementation of various provisions of AML/ CFT act 2006. Penal
provisions work as deterrent and knowing the extent of fine for any illegal transactions.
Part d:
Potential changes needed to implement reporting entity’s AML / CFT program:
Reporting entity is looking to improve the rules and regulations governing anti money laundering
and counter terrorism rules within the entity. It would be extremely beneficial for an organization
to have strong system in place to prohibit any transaction that is not legal. The following changes
shall be made the by the reporting authority to implement AML / CFT programs.
Risk based approach development:

9
ASSESSMENT A
The reporting entity should develop a risk based approach to make provisions keeping in mind
the nature of money laundering transactions and expected impact of such transactions. Using risk
based approach will help the reporting entity to deal with the social menace effectively.
Increase transparency:
The entity should ensure that there is a greater transparency in each and every single transaction.
Increased amount of transparency will help the reporting entity to reformulate the policies and
procedures to implement the provisions of AML / CFT Act 2006.
Corporation: Cooperation between employers and workers will help the reporting entity to
institute strong internal controls within the organization to deal with the impending issues of the
company in implementation of AML / CFT act provisions. Cooperation amongst organizations
shall also help the reporting entity to deal with current problems of implementation of AML /
CFT provisions.
Part e:
Discussion on AFMA code of conduct and code of conduct of another relevant industry:
The AFMA code of conduct and code of conduct of another relevant industry will be helpful in
dealing with the money laundering and terror financing menace in the society for both AFMA
and other relevant industry. The code of conduct is the standard of behavior accepted within an
organization. These are the set of practices and professional attributes which have been pre-
determined as the standard behavior to be practiced within an entity. These behavior include
compliance with the provisions of AML / CFT Act, 2006 along with the other rules and
regulations of AUSTRAC.

10
ASSESSMENT A
The code of conduct is the set of practices which the stakeholders of an organization must
conform with to achieve the organizational objective. In this case the whole objective is to
counter money laundering activities and terror financing by restricting both of these activities.
Anti-money laundering and counter financing terrorism code of conduct in this case include
compliance with the provisions of AML / CFT Act 2006, adhering with the other rules and
regulations of AUSTRAC and also complying with the provisions of Reserve Bank of Australia.
It is important to note that the code of conduct in other relevant industry in respect of anti-money
laundering and counter terrorism financing would not be significantly different, if different at all.
This is because the objective of stopping money laundering and terror financing is key to each
and every single organization. Thus, even for other relevant industry the code of conduct remains
broadly as it is for AFMA.

11
ASSESSMENT A
References:
A., Y. (2018). The Eurasian Group on Combating Money Laundering and Financing of
Terrorism as a Component of International Anti-Money Laundering System. KnE Social
Sciences, 3(2), p.485.
Ching, C. (2018). Recent developments in Taiwan’s anti‐money laundering and anti‐terrorism
work. Journal of Money Laundering Control, 9(6), pp.308-319.
Georgiou, G. (2017). Unintended Consequences of Anti-Money Laundering and Combating the
Financing of Terrorism (AML/CFT). International Finance and Banking, 4(2), p.16.
International Monetary Fund (2017). Sri Lanka: Report on the Observance of Standards and
Codes for Anti-Money Laundering and Combating the Financing of Terrorism and Mutual
Evaluation Report on Anti-Money Laundering and Combating the Financing of Terrorism. IMF
Staff Country Reports, 14(21), p.i.
Masciandaro, D. (2004). Combating Black Money: Money Laundering and Terrorism Finance in
Australia. SSRN Electronic Journal.
Mugarura, N. (2017). An appraisal of United Nations and other money laundering and financing
of terrorism counter‐measures. Journal of Money Laundering Control, 17(4), pp.249-265.
Samantha Maitland Irwin, A., Raymond Choo, K. and Liu, L. (2017). An analysis of money
laundering and terrorism financing typologies. Journal of Money Laundering Control, 17(3),
pp.85-111.
Shehu, A. (2018). Promoting financial inclusion for effective anti-money laundering and counter
financing of terrorism (AML/CFT). Crime, Law and Social Change, 59(5), pp.305-323.

12
ASSESSMENT A
Teichmann, F. (2019). Money laundering and terrorism financing through consulting
companies. Journal of Money Laundering Control, 22(1), pp.32-37.
Whisker, J. and Lokanan, M. (2019). Anti-money laundering and counter-terrorist financing
threats posed by mobile money. Journal of Money Laundering Control, 22(1), pp.158-172.