About AML & CFT   AML stands for anti-money laundering. ‘Money laundering’ arises when a person attempts to conceal the true (criminal) origins of his/her proceeds of crime by laundering (i.e. cleaning) the proceeds. For example, if a person engages in insider dealing and makes a profit from his/her activities (i.e. proceeds of crime) and then tries to conceal or disguise the origin of the monies (i.e. the origin being the crime of insider dealing) to avoid detection, that person becomes a money launderer. The same is true if the person is a drug trafficker and he/she attempts to disguise or conceal the fact that his/her money is derived from drug trafficking.  Equally tax evasion and other serious crimes where the perpetrator receives ill-gotten gains may lead to the separate criminal offence of money laundering (in addition to the predatory offence, i.e. insider dealing, drug trafficking, tax evasion etc).   However persons not involved in the predatory offence may become money launderers when they, without lawful excuse, assist the criminal to launder the proceeds of crime. In some jurisdictions simply handling the proceeds of crime is enough to make the handler a money launderer even though his/her involvement is purely passive.   CTF stands for counter-terrorism financing.  ‘Financing of terrorism’ arises when a person uses either clean or dirty money to fund a terrorist action or terrorist group.  For example, a person may obtain his/her income/wealth from legitimate investments however if he/she uses the money to fund a terrorist act or group, that person commits a serious criminal offence.   One relatively effective way of laundering money and financing terrorism is to pass the money through the financial system in the hope that financial institutions will unwittingly help clean the monies and deliver the funds to the final destination. A financial institution with poor money laundering and/or poor financing of terrorism compliance controls will often be targeted by money launderers and those that wish to finance terrorism.  There are many examples of financial and insurance institutions who have failed their international obligations to implement policies and procedures to prevent and detect such financial crimes. The UK Financial Services Authority has penalised a number of banks and other financial firms in excess of £4million for failing to properly implement AML & CTF controls.  The US FINCEN has fined firms up to $80million for similar transgressions.  Towards the end of 2007 an Australian bank was penalised $100,000 by the US OFAC for alleged violations of US sanction regulations. Australia has passed extensive legislation aimed at tightening the net around those who would otherwise seek to launder money and/or finance terrorism.  This law is known as the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) which received Royal Assent on 12 December 2006.   The AML/CTF Act forms part of a legislative package that implements the first tranche of reforms to Australia's AML/CTF regulatory regime.  The reforms to Australian AML & CTF laws The reforms undertaken by Australian are a major step towards: enabling Australia's financial sector to maintain international business relationships preventing and detecting money laundering and terrorism financing by meeting the needs of law enforcement agencies for targeted information about possible criminal activity; and bringing Australia into line with international standards, including standards set by the Financial Action Task Force (FATF).  About the AML/CTF Act The AML/CTF Act covers the financial sector, gambling sector, bullion dealers and other professionals or businesses ('reporting entities') that provide particular 'designated services'. The AML/CTF Act will be implemented in stages. The commencement dates of some obligations are a day, 6 months, 12 months and 24 months after Royal Assent. This will allow industry to develop necessary systems in the most cost efficient way.   The AML/CTF Act imposes a number of obligations on reporting entities when they provide designated services. These obligations, and the dates on which they come into effect, include: customer identification and verification of identity - 12 months after Royal Assent record-keeping - in various stages, a day, 6 months and 12 months after Royal Assent and establishing and maintaining an AML/CTF program - 12 months after Royal Assent ongoing customer due diligence and reporting (suspicious matters, threshold transactions and international funds transfer instructions) - 24 months after Royal Assent The AML/CTF Act will implement a risk-based approach to regulation. Reporting entities will determine the way in which they meet their obligations based on their assessment of the risk of whether providing a designated service to a customer may facilitate money laundering or terrorism financing. Under the AML/CTF Act, AUSTRAC (see www.austrac.gov.au) will continue its role as Australia's financial intelligence unit. Importantly, AUSTRAC will have an expanded role as the national AML/CTF regulator with supervisory, monitoring and enforcement functions over a diverse range of business sectors. If you would like to read more background on AML & CTF laws in Australia, visit http://www.austrac.gov.au/aml_ctf.html and http://www.ag.gov.au/www/agd/agd.nsf/Page/Anti-money_launderingBackground_to_the_reforms.