AML/CTF: Safe harbour provisions available for reporting entities under certain conditions
27 July 2021

To respond to concerns around Australia’s customer due diligence requirements, the Australian government passed the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) and Other Legislation Amendment Bill 2020 in December of last year.

The changes provide reporting entities with a safe harbour from being held liable for isolated breaches of compliance with know your client (KYC) requirements if certain conditions are met. This aims to minimise the cost and regulatory burden associated with meeting the requirements of the AML/CTF regime.

As a result, a new section 37A and 37B of the AML/CTF Act came into effect on 18 June 2021. This allows you to rely on KYC procedures conducted by another reporting entity, if you:

  • enter into a written agreement with the third party;
  • carry out regular assessments of the third party’s performance of its duties under the agreement, and keep written records of each assessment; and
  • you have reasonable grounds to believe that the KYC requirements in the AML/CTF Rules are being complied with by the third party.

This agreement is referred to as the customer due diligence (CDD) arrangement.

Additionally, section 38 of the AML/CTF act now allows reporting entities to rely on KYC procedures undertaken by another reporting entity or foreign entity if the other reporting entity or foreign entity has undertaken KYC procedures prescribed by the AML/CTF regulations and you have grounds to believe it is appropriate for you to rely on those procedures.

These changes are in effect now.

If you any questions regarding these AML/CTF reforms or would like King Irving to review your CDD arrangements, please contact us

This article is intended for informative and educational purposes only and does not constitute legal advice.

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