Higher due diligence for Asian investors as Australia deadline looms

New rules governing customer due diligence in Australia will see knock-on effects for businesses and individuals throughout Asia, as a January 2016 cut-off date on non-compliance draws closer.

HONG KONG - September 17, 2015.

Asian companies and individuals doing business with firms in Australia will soon to be vetted far more closely than they have ever been, thanks to new Australian compliance rules.

Last year, Australia's Financial Action Task Force identified customer due diligence as a key area of concern within the country's Anti-Money Laundering and Counter-Terrorism Financing Rules.

It listed shortcomings among Australian businesses that included a lack of determination to understand ownership and control structures of customers, frequent failures to identify and verify beneficial ownership of customers, regular overlooking of whether a customer was acting on behalf of another person, failures to identify politically exposed persons (PEPs) and failures to adequately collect information on the purpose and intended nature of business relationships.

Subsequent amendments were made to the country's AML/CTF regulatory regime effective from 1 June 2014, however accountants in Australia were given a final deadline of 1 January 2016 to fully comply with the new rules.

Among foreigners, Asian firms and individuals are most likely to be singled out for extra scrutiny within some Australian business sectors thanks to widely-perceived compliance abuse involving investors from the Far East and sub-continent. Stories in the media this summer have strengthened this opinion...

In April, the Australian Financial Action Task Force noted in its Mutual Evaluation Report on the country that it is 'seen as an attractive destination for foreign proceeds of crime'.

Mondaq's Business Briefing for July reported: "Australia's booming property markets have a growing reputation as some of the most lucrative for international money laundering, particularly for money flowing from the Asia-Pacific region."

And a July article in The Age newspaper exposed how the sale of a Melbourne apartment complex had been used to facilitate the payment of bribes to corrupt Malaysian government officials through Australian developers.

With just several months to go before penalties by the Australian Transaction Reports and Analysis Centre (AUSTRAC) can be issued, chartered accountants or 'reporting entities' must now fully ensure they are taking 'reasonable steps' towards compliance with the new customer due diligence obligations.

Australian businesses are consequently speeding through transition plans setting out their paths towards full compliance, revising their AML/CTF programs and re-conducting risk assessments.

They are also providing AML and CTF training to employees regarding these new customer due diligence obligations as well as providing training on PEPs and beneficial ownership.

In the meantime, the Australian government has given AUS$20m of funding to improve the detection and disruption of terrorism financing and increased enforcement activity in high risk areas, such as the remittance sector.

In some areas, Australia has exercised a strong regime for combating money laundering and terrorism financing: particularly in regulating its major money laundering industries such as banking, remittance and gaming.

But, non-financial businesses such as real estate agents, lawyers and precious metal industries have long been excluded from AML/CTF regulation, a situation that is due to change at the end of the year when regulators are expected to provide recommendations on increasing due diligence in these areas too.


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