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AAR wants laundering tip offs

AAR wants laundering tip offs

ALLENS ARTHUR Robinson (AAR) wants the Federal Government to allow inter-company tip offs to be exempted from its reform of anti-money laundering (AML) laws. As part of its submission to the…

ALLENS ARTHUR Robinson (AAR) wants the Federal Government to allow inter-company tip offs to be exempted from its reform of anti-money laundering (AML) laws.

As part of its submission to the Senate Legal and Constitutional Committee considering the draft bill on AML reform, Allens said 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 Allens, 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 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.

The Privacy Commissioner, meanwhile, has concerns over the ‘threshold transaction’ level. At present, the level is $10,000, but this has been the case since 1991 and the commissioner wants it re-examined and wants the new regulator’s power to be checked.”

“If this figure remains at this current prescribed level, then, as a consequence of price inflation, the reporting scheme will increasingly capture personal information regarding transactions that may not have been anticipated when the legislation was first drafted,” the submission said. “Further, section 5 of the Exposure Bill defines ‘threshold transaction’ and introduces the authority for AUSTRAC to prescribe, by regulation, threshold transactions for specified transactions less than $10,000, including non-cash transactions. The Office understands that such regulations are those provided for by section 205 of the Exposure Bill and prescribed by the Governor-General. The justification for requiring the need to prescribe what could be relatively small transactions as threshold transactions requiring the collection and reporting of personal information is not clear. Further, it may be useful for the regulation provision to contain a consultation requirement.”

Stuart Fagg is Editor of Lawyers Weeklys sister publication, Risk Management

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